How to Face CA Examinations ? (IPCC / PCC / Final)

Transcription

How to Face
CA Examinations ?
A Matrix of Winning Strategies
(IPCC / PCC / Final)
Board of Studies
The Institute of
Chartered Accountants of India
A Statutory Body established under an Act of Parliament
C O N T E N T S
Chapter 1
Chartered Accountancy - A Passport to Success
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Chapter 2
Chartered Accountancy Course
- Know Your Education and Examination System
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Chapter 3
Make Your Study Effective
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Chapter 4
Preparing for Examinations - A Systematic Approach
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Chapter 5
IPCC (Subject-specific Guidance)
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PCC (Subject-specific Guidance)
84
FINAL (Subject-specific Guidance)
89
Reading List of Books
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President's Message
CA. Jaydeep Narendra Shah - President, ICAI
My Dear Students,
Chartered Accountancy is a highly illustrious, dynamic and rewarding profession. Being
a professional course, it is a highly demanding on time and energies of the students.
While this is true that this course demands hard work and concerted efforts on the part
of students, it is not true that it is extremely difficult to complete this course. Of course,
this course requires rigorous theoretical education and practical training and testing of
students before they can be designated Chartered Accountants.
It is my firm and considered belief that the chartered accountancy course is not tough. It
can be simple to pass the examinations, provided you plan yourself and work effectively
towards the achievement of the desired goal. It is human nature to gain knowledge and
succeed. Imbibe this nature fully, work hard as there is no short cut to success and hard
work never goes unrewarded. Remember, a piece of gold has to pass through intense
heat before it can get its shine and sparkle.
I am very happy that the Board of Studies of the Institute of Chartered Accountants of
India is revising the Booklet on “How to Face CA Examinations” to help students in their
preparation for the examinations. The publication is a result of commitment and hard
work of Board of Studies and its faculty members. It is my sincere belief that the booklet
will help the students to plan out their studies. With proper approach, the course will
become simpler and with the focused approach students will easily be able to assimilate
tricky concepts and pass the examinations. In a nutshell, your approach may include:
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Have confidence in yourself. You should have positive approach and should not allow
negativity to creep-in.
Plan your studies and study regularly.
Do not resort to selective studies. All topics must be assimilated fully.
Avoid time wasting activities. However, mix recreation in a limited manner to keep
your mind fresh.
Discuss with your principal, experienced faculties and successful senior students.
Focus your answers to the questions that have been asked. Do not write vague and
irrelevant answers.
While writing answers in the examinations, you must use good language and write
legibly.
The success is yours only if you aspire and work for it. In the words of Napoleon Hill “Patience, persistence and perspiration make an unbeatable combination for success.”
Wish you all the best
CA Jaydeep Narendra Shah
President, ICAI
Vice President's Message
CA. Subodh Kumar Agrawal - Vice President, ICAI
My Dear Students,
Chartered Accountancy Course calls for a scrupulous strategy and a sincere approach in
order to succeed. A complete understanding of the course structure and adequate
planning to cover all the topics exhaustively is sine qua non for achieving success in the
examinations. It is really heartening that the Board of Studies is revising the Handbook “How to Face CA Examinations” to help students in their preparation for the
examinations. This booklet will certainly assist and guide you to understand the purpose
and objectives of the CA examinations. Over the years, several myths have generated
about the nature of CA examinations. This publication is a sincere attempt to negate the
negative myths associated with the course and set the picture in right perspective.
The CA course curriculum is of high standard and has a judicious mix of theory and
practice. One of the primary focus areas for the ICAI is bolstering the academic
foundation of the students, especially in view of the evolving dynamics of the global
business environment. It also thrusts moral responsibility on the students to work hard.
Hard work, dedication, tenacity and commitment to achieve your goal are the key
ingredients that you require for sailing through the CA examinations successfully. You
need to have a strong desire to obtain the coveted qualification and work at it.
Persistence will reap good results. It is rightly said by Epicurus “The greater the difficulty
the more glory in surmounting it. The skillful navigator gains reputation from facing the
storms and tempests”.
I understand that the students have their own individual strategies for approaching the
examinations. After going through this booklet, you wish to modify and align your
approach to make your immediate task of passing examinations a simple step. Your
approach may include the following tips:
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Improve conceptual clarity, avoid rote learning
Plan your study, avoid last-minute preparation
Learn by writing
Do not do selective studies
Think positive
Meditate and Exercise.
I appreciate the sincere efforts put in by the academic staff of the Board of Studies in
bringing out this useful booklet. I earnestly hope that this publication on 'How to Face CA
Examinations' would help the students in moving ahead on the right path and become
successful in their endeavour to clear the Institute's examinations and join the
profession within the minimum possible time.
Wishing the student fraternity a great professional career ahead!
Yours sincerely,
CA. Subodh Kumar Agrawal
Vice President, ICAI
Chairman's Message
CA. Nilesh Vikamsey - Chairman, Board of Studies, ICAI
My Dear Students,
I am pleased to inform that the Board of Studies has come out with the revised edition of
the booklet titled “How to Face CA Examinations.” This lucid, comprehendible handbook
gives practical tips on how to study, how to whet your learning skills, how to wisely use the
three hours given to you and also how to present your answers in the exams. Your mentor
and guide - the Board of Studies has always given you logistic support in achieving your
treasured wish of becoming an accomplished Chartered Accountant. This handy and
timely booklet will further assist you in achieving your goal.
It is true that Chartered Accountancy course is very challenging and demands your
complete dedication, focus and hard work. However, with proper time management,
sincere efforts, hard work, positive attitude and a burning desire to be successful, you
will be able to emerge successful.
It is not only how much you study but what you study and how well you study that
determines your success in the examinations. No doubt, hard work is the key to success.
However, it is also important that hard work should be focused towards your ultimate
goal of passing the examination and emerging as a successful chartered accountant.
This booklet concentrates on helping you to plan correctly to lead you to the path of
success.
Planning is, therefore, an integral part of your study. In fact, as the very first step of
planning, you need to prepare a detailed study time table. For this purpose, you have to
know the syllabus for each subject and assess the time which each subject and each
topic within the subject would consume. Preparing a study time table would also help
you to broadly assess the time required for study and keep you mentally prepared of the
length and depth of the river you have to cross.
The various knowledge inputs of BOS would serve as your aide in the study process. Each
of these inputs aid in one of the multifarious purposes of providing conceptual clarity,
keeping you updated or helping you to self-assess the effectiveness of your study and
revision. I advise you to make full use of these knowledge inputs and enhance the quality
of your study. All these aspects, both general and subject-specific, are dealt with
extensively in this booklet.
Do read the booklet carefully and make sure that you follow the study tips given herein
meticulously. Surely, it would be of great help in planning and organizing your study in an
effective manner. Do not forget that implementation of your study plan is equally
important. Adhere to the time table and avoid major deviations. If you are well prepared
for the examination, you would be able to confidently face the examinations and this
positive attitude will ultimately be reflected in your results.
These are small words of advice – but it will go a long way in helping you to achieve
success. This booklet, which teaches you the ideal way to study, is a step to guide you to
the path of success. I am sure that success will be all yours, if you follow the tips given
and work religiously in that direction!
With Best Wishes,
Yours Sincerely,
CA. Nilesh Vikamsey
Chairman
Board of Studies, ICAI
Vice Chairman's Message
CA. Madhukar N Hiregange, Vice Chairman, Board of Studies, ICAI
Dear Students,
The booklet on “How To Face CA Examinations” as we understand, was very well received
as a directional, clarificatory and an authoritative guide in the past. This upgraded 2012
version we are sure would assist you further in making your studies much more effective,
consequently in attempting your examination with confidence and clarity.
In the past years, the pro-active measures from the examination point of view and
guidance from the BOS has led to better performance of students overall. Moving with
times, the focus is now on understanding the concepts, applying what we have learnt in
business situations, analysis of information and skill sets required by the clients as well
as employers. The assimilation of the same in a student's routine while studying or while
doing audit/ other work at office would make him/ her a knowledgeable, globally
respected and an acknowledged professional.
Some suggestions to do better in your examination among many others are:
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Your dream converted into specific goals makes studies a pleasure.
Make a comprehensive day to day plan and couple with self-discipline. Ensure time
for relaxation/ sport as well as sufficient sleep.
In case you choose to attend tuitions at ICAI or elsewhere or online, the take away
depends on your focus/ listening at the time of class.
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Revision immediately thereafter in the evening (even while travelling back home) is
found to recall and reinforce the learning of the day.
Mock tests are conducted twice before each examination and may serve to confirm
the level of preparedness, and if found lacking in some subjects, to cover up those
areas of weaknesses. You may also look for online tests.
At this juncture it may be appropriate to quote from the scientist Albert Einstein about
values - “ Try not to become a man of success, rather become a man of value.” We as
professionals are differentiated from businessmen due to the fact that our primary
motive is not profit and we abide by our own code of ethics.
Your suggestions in regard to how to empower you in terms of knowledge to face the CA
examinations are welcome at [email protected].
I take this opportunity to wish every one of you a joyous learning and success in the CA
examinations and join the qualified community of Chartered Accountants.
Yours sincerely,
CA. Madhukar N Hiregange
Vice Chairman
Board of Studies, ICAI
Chartered Accountancy
- A Passport to Success
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CHAPTER ONE
C
hartered Accountancy (CA) has emerged as a distinctive profession of overriding importance in the twenty
first century particularly in today's free globalized world. Chartered Accountants in public practice as well
as those employed in industry, finance and commerce are playing a wide variety of roles be it finance,
management or policy making, both at home and abroad. In view of the major changes in the economy, innovative
financial tools are being constantly introduced and the CA profession is also an integral part of these
developments.
Chartered Accountancy is being increasingly acclaimed as the “best” professional qualification in this
millennium of free market economy and globalization of trade and services. Education and training system of
Chartered Accountants is such that after qualifying, a Chartered Accountant may go for public practice either of
his/her own or in partnership with other Chartered Accountant(s); or else one may go for employment in trade,
commerce, industry, finance, etc.
CA is an internationally relevant and accessible qualification – a go-anywhere passport to a successful career. In
an age of growing globalization and intensified competition, modern business demands timely and accurate
financial information. That is why, CAs are sought after by companies across the world. They are commercial
business managers with wide-ranging skills. In view of the integrated scenario of the globalization, the world
economic scenario is rapidly evolving. Apart from exciting opportunities and attractive pay-packages, Chartered
Accountancy qualification is recognized internationally, and its reputation and value are maintained through
high standards of assessment and regulation. This is worthwhile to note that in terms of strength in core areas, viz.
accountancy, auditing, taxation, CAs are far ahead and leaders. It is the professional qualification of choice for
businesses worldwide.
The profession of Chartered Accountancy is looked upon with great honour and dignity. Chartered Accountants
have developed this over the years through sincerity, devotion, and integrity. Due to the increasing demand for
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HOW TO FACE CA EXAMINATIONS ?
their services, the average earnings/ remuneration packages of Chartered Accountants has also steadily
increased in the recent past. Hence a student, on successful completion of examinations and training, could look
forward to a comfortable compensation package.
Purpose of this Booklet
The present attempt is an initiative of the Board of Studies to apprise the CA students about the nuts and bolts for
preparation for a professional examination. The Board of Studies is committed to strengthen the educational
base of the CA students.
The purpose of CA education has been conceptualized as that of preparing competent professional accountants
imbibed with a zeal to make life-long contribution to the development of the profession and the society. The role
of professional accounting examinations in assessing the competence of candidates has been highlighted in
order to view the Institute's own examination system in its proper perspective. Since the Institute's professional
examinations have a thrust on testing both theoretical proficiency and practical competence of CA students, it is
suggested that students, especially those coming from the university graduate stream, should reform their
approach to CA education and examinations and prepare accordingly.
Chartered Accountancy Course
- Know Your Education
and Examination System
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CHAPTER TWO
E
ducation, if simply stated, means the process of gaining knowledge, inculcating forms of proper conduct
and acquiring technical competency. It also aims at bringing progress in practical fields to enable each
educated individual of society to earn a living. Education of the various fields produces productive human
resources, who can contribute to the creation of wealth for a country. Thus, it lays the foundation for the
accomplishment of a person's dreams and aspirations. Education builds a resourceful individual out of a raw
human being. Education contributes to the cultivation of a prudent person and paves path for this feeling of
fulfillment. The true purpose of education is to bring about profoundness to one's emotions, to broaden one's
perspectives and to lead to a healthier approach of looking at life.
Education and Training - An Integral Aspect
Modern-day education, whether for CA Course or any other course, is dominantly examination-driven. So much
so, the purpose of education has come to be identified as qualifying in the relevant examination. Students are
obsessively oriented to acquire just that much knowledge and skills, as to meet the examination requirements. It
is to be emphasized that an over-emphasis on examinations is unlikely to lead to a sound and solid educational
base. Examinations are no more than an integral element of the educational process and not the other way round.
A clear recognition of the larger purpose of education is essential on the part of the concerned players so as to
understand the role of examinations in a correct perspective.
In the context of the CA course, the purpose of education and training is to help students mould themselves as
competent professional accountants capable of making a positive contribution over their lifetime to the
profession and society. Broadly speaking, education and experience (practical training) of professional
accountants must provide a foundation of knowledge, skills and professional values that enables them to
continue to learn and adapt to change throughout their professional lives.
A sustained and intensive programme of professional education and training provides CA students an
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opportunity to acquire entry level professional competence. It is necessary to assess periodically the extent and
level of professional competence acquired by the CA students.
Board of Studies - Provision of Academic Resources
Excellence in any professional course comes through consultation of high quality study materials and a
meticulous study plan. Board of Studies provides multitude of academic resources of fairly high quality and
dependable sources of study for students to enable them to develop the much needed intellectual base and
inputs for assimilation.
Study Material
The Board of Studies has always been providing a comprehensive study material on each and every subject. The
aim of the study material is to cover the entire course which is sub-divided into various chapters. The presentation
of the subject matter is done in a manner so as to enable the students to grasp and understand the subject and
strengthen their knowledge in the particular area. The study material also aims to define and confine the scope of
syllabus while developing each topic. An attempt is also made to provide simple illustrations and case-studies to
highlight the difficult topics in a lucid manner. The Board of Studies updates its material on a periodical basis.
The Institute's other professional pronouncements like Accounting Standards, Auditing Standards, Guidance
Notes on various matters relating to Accountancy, Auditing and Taxation etc. are critically important to CA Final
students (and to IPCC students also to some extent) as bases of knowledge and its application to practical
problems in the relevant subject areas. Students are expected to have a good insight of the contents of the above
publications for their immediate purpose of examinations and also otherwise. All such publications which are
relevant for students have been incorporated at appropriate places in the Study Material for Advanced
Accounting (IPCC), Advanced Auditing and Direct Tax Laws (Final). CDs have also been developed by the Board of
Studies and made available along with the study materials to the students at IPCC and Final levels. These could
be carried by students even while going for outstation audits and made use of whenever time is available.
Practice Manual
Over a period of time the Industry has been observing that the CA, though very knowledgeable, is unable to apply
what he/she has learnt. Therefore, in order to train the students to apply the theory into practice, the Board of
Studies has brought out Practice Manuals which contain series of questions in respect of various topics covered
in the study material. The questions have been arranged in a manner whereby one may develop understanding,
commencing from a simple topic to a more complex one. With a view to making Practice Manual a single source of
reference, important definitions and formulae have been given at the beginning of each chapter. This would
enable the student to straightaway do the practice of various questions given in the Manual.
Suggested Answers
The Board of Studies regularly prepares and publishes Suggested Answers to questions set in the CA
examinations, held every six months. The suggested answers volumes (and their compilations in some subjects)
are a valuable source of study for the CA students. They provide credible glimpses of not only the desirable ways in
which examination questions are to be attempted but also of the professional quality and standard of the
answers expected of students in the CA examination. Students would be well-advised to have a collection of such
volumes for at least 10 to 12 previous examinations.
CHARTERED ACCOUNTANCY COURSE - KNOW YOUR EDUCATION AND EXAMINATION SYSTEM
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Revision Test Papers
Revision Test Papers are issued well ahead of each examination. These contain a number of questions with
solutions/answers/hints, which would be of much help to students. Soft copies of all these materials are
available on the official website and students can download them.
The Chartered Accountant Student
The students' monthly Journal, published by the Board is another regular channel of communication with
students, which contributes to the fund of knowledge required of CA students through Articles, Case Studies,
Reports, Academic updates, Announcements, etc.
The Institute's monthly Journal 'The Chartered Accountant' is a valuable source of eminently readable articles of
topical interest, relevant notifications and clarifications by Government of India, RBI, SEBI, CBDT etc., abstracts
of relevant legal decisions on Corporate and Tax Laws, information on contemporary developments in
Accounting, Finance, Auditing and Corporate and Tax Laws etc. Students, especially of IPCC and Final Courses,
should regularly keep in touch with the Journal to enrich their knowledge base, relevant for examination and other
purposes.
Board of Studies Knowledge Portal
Board of Studies Knowledge Portal is primarily to ensure free and unrestricted flow of knowledge and information
to the students across the country by way of easy access to the latest publications of the Institute. Our efforts will,
however, bear fruit only if you make it a habit to browse the portal as often as possible and assimilate the
knowledge inputs contained therein.
Do make it a part of your daily agenda to surf through the Institute's website and be abreast with the latest on
accounting standards, standards on auditing, guidance notes etc. The BOS hosts its latest publications,
including study materials, practice manuals, revision test papers and suggested answers also on the knowledge
portal. The developments and amendments in various subjects of the CA curriculum, by way of Supplementary
Study Paper, Select Cases in Direct and Indirect Tax Laws, Circulars and Notifications issued by the CBDT/CBEC
etc. are also hosted thereon.
The portal also provides information about the applicability of accounting standards, standards on auditing, the
Finance Act, circulars and notifications well in advance of the examination. The aim is to provide clarity and
remove any confusion regarding whether a particular standard or amendment is applicable for the examination.
Students' Counselling
The faculty of the Board of Studies located at Noida is a rich source of academic support to the CA students. The
full-time faculty for all the subjects of the CA course are ever ready to help students in answering their queries, in
clarifying specific points and doubts on any relevant academic matters. In case students need any clarifications
and have any suggestions to make for further improvement of the material contained herein, they may feel free to
write to the Director, Board of Studies, A-29, Sector-62, NOIDA - 201 309 (UP) E-mail:[email protected]
The Board of Studies also provides on-line help to students pursuing Chartered Accountancy Course. Students
with their queries in any subject may contact the group at [email protected] with their subject related problems
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and suggestions. Students, who do not have the facility to get guidance for solving their academic problems
arising in the course of their preparation, may feel free to take advantage of this scheme.
Standard Text Books
It would be highly beneficial to students if they supplement the study materials in each subject with one or two
standard text books. This is all the more necessary in the case of practical subjects like Accounting, Costing, and
Taxation. Reliance on one or two well-written text books in addition to the study materials serves to strengthen the
sense of security and self-confidence of the students. It also enables them to work out practical problems based
on various theoretical concepts and understand their impact and application clearly. A reading list has been
annexed for your reference.
A Word about Chartered Accountancy Examination
The aim of CA Final examination is to assess whether the students have acquired the expected standard of
professional competence so as to qualify as Chartered Accountants (of course after fulfilling other
requirements). It is desirable that the assessment of professional competence should measure more than just
theoretical knowledge. The professional examination should be designed to determine, inter alia, that the
examinees:
. have a sound technical knowledge of the specific subjects of the curriculum,
. can apply technical knowledge in an analytical and practical manner,
. are able to extract from various subjects the knowledge required to solve multiple topical problems,
. can identify information relevant to a particular problem by distinguishing the relevant from the irrelevant in a
given body of data,
. are able, in a multi-problem situation, to identify the problems and rank them in the order in which they need
to be addressed,
. appreciate that there can be alternative solutions and understand the role of judgment in dealing with these,
. possess ability to integrate diverse areas of knowledge and skills,
. can communicate effectively to the user by formulating realistic recommendations in a concise and logical
fashion,
. have knowledge of the ethical requirements of the profession.
The examination system of the Institute of Chartered Accountants of India (ICAI) also seeks to assess the
professional competence of the students on the above lines on a progressive basis. They have to demonstrate
'basic knowledge' and 'working knowledge' respectively in the relevant subjects of the syllabi. Basic knowledge
envisages understanding of the broad nature and scope of the subject and its fundamentals at the entry level test
called Common Proficiency Test (CPT), while working knowledge envisages understanding of the practices and
problems relating to the subjects and the ability to apply such knowledge to practical situations at the Integrated
Professional Competence Course (IPCC) level. In contrast, candidates for CA Final examination have to
demonstrate that they have acquired 'advanced knowledge'. Thus, three levels of knowledge - basic knowledge,
working knowledge and advanced knowledge - specify the scope and depth of professional competence
expected to be acquired and demonstrated by CA students at the CPT, IPCC and Final stages respectively.
CA Examinations - Some Distinctive Features
There are certain elements of the CA examinations which are decidedly beneficial to students as under:
CHARTERED ACCOUNTANCY COURSE - KNOW YOUR EDUCATION AND EXAMINATION SYSTEM
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High and Consistent Standard of Examinations
One of the hallmarks of the Institute's examinations is their high but attainable standard, which could be met with
adequate effort even by average students. There is also a remarkable consistency in the standard of CA
examinations; it is not exposed to any vagaries since it is institutionalized into the CA system. These two features
would decidedly be helpful to CA students in enhancing their self-assurance by mobilizing their internal strengths
to reach the expected standards and to experience a sense of achievement by performing well in the
examinations.
Examinations Twice a Year
The May and November examination cycles are also advantageous to students. They are given two opportunities
in a year to pass their groups quickly. There is also a flexibility to appear in one or both groups at a time. Groupwise clearance is easier for some students. A success in one group improves their confidence to prepare well for
the remaining group. The provision of one day gap between two papers has a positive impact on the performance
of students in raising their confidence level since they get sufficient time to revise for the next paper. Similarly, the
Council's decision of allowing additional 15 minutes reading time would help students in chalking out the
strategy to be followed while attempting the paper. This would act as a great stress reliever to students as in this
extra reading time, they will be able to prioritize their answers.
Practical Orientation of Question Papers
Several question papers, particularly at Final level examination, contain practical problems and queries, which
need to be solved by the candidates by applying their theoretical knowledge. Their practical training and exposure
help a lot in answering problems and queries in Accounting, Auditing, Corporate and Taxation Laws, Management
Accounting and Cost Accounting question papers. An advantage with such papers is that they are very scoring.
Students can get very high marks by correctly solving the problems and queries, unlike in theoretical questions.
Disciplined Conduct of Examinations
The Institute is among the very few bodies, which have an impeccable record in maintaining high quality of
discipline in holding the examinations. The entire examination process is set in motion carefully and with clocklike precision; each stage is monitored closely, leaving nothing to chance. The Institute's examinations have
earned a high credibility for the care and competence with which they are conducted.
CA students are fortunately placed in the sense that they can rest assured of a level-playing field on which their
professional knowledge and competence are tested by the examination system of the Institute certainty about
dates of examinations and declaration of results; zero tolerance for adoption of unfair means by candidates;
uniform valuation of answer papers.
Make Your Study Effective
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CHAPTER THREE
T
he thrust of this part is on the kind and quality of efforts needed to acquire knowledge embedded in the CA
course. Studying calls for a conscious and concerted mental effort to examine, analyse and assimilate the
contents of a topic, to reflect on their implications and to retain, remember and recall what all is assimilated.
Learning effective study skills is a very important component; however, study skills alone won't make one a great
learner. The first and primary goal when it comes to studies is to develop Smart Study Habits that will naturally
promote and enhance one's learning experience.
How to Study?
The purpose of studying the various subjects in the CA course by the students is to acquire adequate knowledge
whether it is basic knowledge, working knowledge or expert knowledge, as the case may be, so as to perform well
in the examination. In the context of students, adequate knowledge acquired in the various subjects has to be
sufficiently durable, retainable, recallable and presentable on appropriate occasions. The process of acquiring
knowledge is like building bricks, piece-by-piece. A student might have acquired, over a period of his student
career, a set of learning or study skills, styles and attitudes for building the bricks of knowledge in his mind. Even
so, it may be worthwhile to spell out and suggest a few appropriate and helpful study skills and learning attitudes
for the benefit of students.
As you sit comfortably in a serious learning mode and in a conducive study setting, you take up the first topic,
consisting of say 5-10 or more pages in the subject of your choice for study. Give a quick reading in the first
instance, size up its anatomy and warm yourself up for an intensive, in-depth study. As you study, understand the
definitions of concepts, and highlight and note them down separately. You also have to analytically grasp and
etch in your mind several aspects of discussion of the topic, for example:
. Central theme and structure of the topic.
. Various elements of the concepts and the underlying principles and assumptions.
. Linkages among the concepts and their facets.
MAKE YOUR STUDY EFFECTIVE
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Similarities and differences among the concepts and processes.
Steps involved in the various processes.
Cause and effect relationship among the ideas and discussions.
Characteristic features of a situation.
Desirable to make organized, brief and clear notes on all the important aspects as you study
You may prepare a set of small, simple graphics to depict some of the above aspects, so as to gain more
understanding. Also, frame a few relevant small questions and problems and spell out answers and solutions.
This will clarify your thinking better. Relate what you have already known on the topic with the new insights, if any.
Ask yourself whether what you read makes sense. You can try 'humanizing' the matter of your study by thinking of
a few examples in real life, a few human characters and role players. Read again those aspects and areas which
you have not adequately understood; prepare a list of such areas which you have still not understood even after
extra effort, so that you may quickly refer to other sources, like a text-book, friends, seniors, teachers etc. In a
topic, each and every point or aspect may not be equally important. Some may be more important and the others
less; segregate the former from the latter and also from needless details and peripheral areas.
After you finish studying the topic, take a pause for a while to reflect and recall in an organized manner the
integrated picture of what you have understood. Look back into the matter again to check whether you have been
able to recall all the important aspects of the topic. Make a simple summary in writing of what you have learnt at
the end of the notes.
As you progress in the coverage of different topics of the subject, adopt the practice with a sense of determination
and drive, which will definitely help you in the examinations.
Form a Study Group
There is a strong case for forming a small study group in the neighbourhood. The group may engage in collective
study and learning of the various theoretical and practical subjects. They may assemble at a place frequently
(twice in a week, for example), exchange feedback on their studies, understood/not understood during the last
few days, try to clear doubts, reinforce their knowledge collectively, set a question paper by themselves and
attempt it under examination conditions, exchange the answer papers for 'peer' evaluation and feedback and so
on. These exercises have a synergistic value in the sense that the amount of knowledge acquired collectively is
more than the sum of the amounts of knowledge acquired individually. One can always learn more by learning
together.
The study group may also act as a social group for brief relaxation-oriented fun sessions to drive away traces of
stress, fears and frustrations of group members.
The Nine Study Habits of Successful Students
Successful students have good study habits. They apply these habits to all of their classes and assignments:
1. Try not to do too much studying at one time
If you try to do too much studying at one time, you will tire and your studying will not be very effective. Space the
work you have to do over shorter periods of time. Taking short breaks will restore your mental energy.
2. Plan specific times for studying
Study time is any time you are doing something related to your coursework. It can be completing assigned
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reading, working on a paper or project, or studying for a test. Schedule specific times throughout the week for your
study time.
3. Try to study at the same time each day
Studying at the same time each day establishes a routine that becomes a regular part of your life, just like
sleeping and eating. When a scheduled study time comes up during the day, you will be mentally prepared to
begin studying.
4. Set specific goals for study times
Goals will help you stay focused and monitor your progress. Simply sitting down to study has little value. You must
be very clear about what you want to accomplish during your study times.
5. Start studying when planned
You may delay starting your studying because you don't like an assignment or think it is too hard. A delay in
studying is called "procrastination." If you procrastinate for any reason, you will find it difficult to get everything
done when you need to. You may rush to make up the time you wasted getting started, resulting in careless work
and errors.
6. Work on the assignment you find most difficult first
Your most difficult assignment will require the most effort. Start first with your most difficult assignment since
this will require your maximum mental energy.
7. Review your notes before beginning an assignment
Reviewing your notes can help you make sure you are doing an assignment correctly. Also, your notes may include
information that will help you complete an assignment.
8. Tell friends not to call during study times
Two study problems can occur if your friends call you during your study times. First, your work is interrupted. It is
not that easy to get back to what you were doing. Second, your friends may talk about things that will distract you
from what you need to do. Here's a simple idea - turn off your cell phone during your study times.
9. Review over the weekend
Yes, weekend should be fun time. But this is also the time to do some review including consultation with a friend.
This will help you be ready to go on.
Improving Concentration
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Study in a quiet place that is free from distractions and interruptions. Try to create a space designated solely
for studying.
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Make a study schedule that shows what tasks you need to accomplish and when you plan to accomplish each
task. This will provide you with the structure you need for effective studying.
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Try to study at that time of the day you work best. Some people work well early in the morning, others late at
night. You know what works best for you.
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Make sure, you are not tired and/or hungry when you study. Otherwise, you won't have the energy you need to
concentrate. Also, maintain your physical fitness.
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Don't try to do two tasks at the same time. You won't be able to concentrate on either. Concentration means
focusing on one thing to the exclusion of all else.
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Break large tasks into series of smaller tasks that you can complete one at a time. If you try to complete a
large task all at once, you may feel overwhelmed and will not be able to maintain your concentration.
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Relax; it's hard to concentrate when you're tense. It's important to relax when working on a task that requires
concentration. Meditation is helpful to many students.
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Clear your mind of worrisome thoughts. Mental poise is important for concentration. You can get distracted
by your own thoughts. Monitor your thoughts and prevent yourself from following any that take you off track.
Don't daydream.
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Develop an interest in what you are studying. Try to relate what you are studying to your own life to make it as
meaningful as possible. This can motivate you to concentrate.
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Take breaks whenever you feel fatigued. There is no set formula for when to take breaks. You will know when
you need to take a break.
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Studying without concentration is like trying to fill a bucket with water when the bucket has a hole in its
bottom. It doesn't work.
Equally Relevant Aspects
Develop Deep Love, Interest and Respect for Learning
This is a matter of emotions and attitudes. Most students are in love with something or the other. So is the case
with interest and respect. They respect their parents and other elders, teachers and other well-wishers. Similarly,
they can be presumed to have a few interests or hobbies, capacity for emotions like love, interest and respect are
thus in the blood of most humans, including students. Thus, with a little effort, it should be possible for students to
develop a deep love, interest and respect for their studies and different subjects. It is only a matter of extending
the above mentioned emotions to studies which are in fact more critical than everything else for their survival and
success in life.
Keep your Mind Open and Healthy
Our mind has an enormous capacity for absorbing knowledge, ideas and information. Therefore, one should not
foreclose any opportunity for learning new things or relearning already known matters. Students, especially,
should be receptive and responsive to acquire the required amount of knowledge.
An open, receptive and healthy mind is a prerequisite for concentration on studies. A regular meditation for a few
minutes may help the student to train the mind to remain cool, calm, clean and clear.
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Keep yourself Physically Fit
Physical fitness and health are one of the essential pre-requisites for concentration on studies, as for any other
activities. If you are physically fit, your mind will also be alert and active. The secret of keeping oneself physically
fit and healthy is very simple: eat healthy and energy-giving food in moderate quantity at regular intervals. Do
regular physical exercises including Yoga Asanas, brisk walking or jogging, deep breathing etc. for a brief period
daily. These exercises will also help reduce your physical and mental strain and stress and maintain your
equilibrium.
Need for Relaxation and Recreation
The mind should not be kept too busy all the time, whether on studies or something else. It is necessary to allow
the mind to liberate itself from serious matters for a while at regular intervals; relaxation, rest and recreation are
like rich food for mind since they infuse the much needed energy and freshness. There are several ways to
experience relaxation and recreation: sleeping, deep breathing, watching useful educational programmes on TV,
reading light novels and other general books, playing with children, early morning walk, visits to uncrowded
places of worship etc. However, each student has his own concept of relaxation and recreation.
Developing a Good Memory
Concentration of mind in intensive learning helps the student to quickly comprehend the study matter to the
required extent, as also to remember it on a durable basis for purposes of presentation and communication at the
appropriate occasion. In other words, it improves the efficiency and effectiveness of learning. There are a few
simple ways to improve one's memory skill, which are listed below:-
Intensive Practice
The students should have a high degree of patience for repetitively solving practical problems in the concerned
subjects so that the whole mechanics of tackling and processing any type of problems get printed in their mind.
They will be highly comfortable in the examination hall in attempting practical questions. So far as theoretical
questions are concerned, remembering various portions of studies is possible, if they make several quick
readings and revisions after the first round of intensive learning.
Be Well-organized
If a student prepares systematic notes on all the topics and keeps them in an orderly manner and refers to them
frequently, his/her ability to remember the structure of the matter will be good. The process of recalling from the
memory and presenting the matter in the examination are easy steps.
Observation
This is an easy and popular method of sharpening one's memory power. You observe a small scene, a set of things
at a place, the titles of books in a small book rack, the headings on the first page of a newspaper etc. for a very
short while, then close your eyes and recall what you have observed and read, count how many items you were able
to recall. Sharpening the power of observation by regular practice is one way to sharpen one's memory power
also.
Group Discussion
As stated earlier, formation of study circles and study groups for purposes of collective study and discussion are a
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powerful means of improved learning. Serious discussions and intensive exchange of views and insights on the
things learnt, as also collective solution of practical problems are important ways of remembering various
theoretical and practical topics.
Schematic Presentation
Another technique for improving memory is through use of tables, bullet points, diagrams, flow charts, circles
etc. relating to the main contents of the subject matter. In addition, the formation of the memory codes by
choosing key words and characters from the text contents will assist in easy recall and sequential presentation of
answers in the examinations and to improve memory power.
Preparing for Examination
- A Systematic Approach
4
CHAPTER FOUR
T
his segment covers a few dos and don'ts for students to help them smooth-sail through the crucial climax
scene-the three hours examination time. In a way, tips for good examination performance can be
summarized into 4Ss: Sincere, Studious, Systematic and Smart. These are the four pillars over which one
can build up his saga of success as a student. Any search for short-cuts to success will be as futile as a wild-goose
chase. The examination system of the Institute is one of the best systems in India and it has maintained very high
standards of integrity, confidentiality and credibility over the years. It seeks to test the multifaceted knowledge
which a chartered accountant is expected to have. Here are certain guidelines to help you get through the
examinations:
Read Study Material Thoroughly
The study material would help you to develop a strong conceptual base. They give you the parameters within which
you have to study. Make it a habit of going through them thoroughly as these will enable to understand the basic
concepts of the subjects and develop your ability in understanding different concepts and applications. Besides,
do refer to at least one standard text book and solve all the illustrations and problems therein. This will further
build your conceptual clarity of a particular subject and strengthen your problem solving skills.
Practice, Practice and Practice
Practice makes a man perfect. Students must practice as much as possible. Many students start practicing from
various books without first understanding the subject and the concepts involved. This approach is absolutely
wrong. You need to make your base first and then start practicing. The following publications brought out by the
Institute will be of great help:
. Practice Manual for all the subjects
. Suggested Answers/Compilations
. Revision Test Papers.
PREPARING FOR EXAMINATION - A SYSTEMATIC APPROACH
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The more you practice, the better engraved will be the concepts in your mind. Don't indulge in selective reading;
no part of the syllabus is less important and leaving any portion could be fatal.
Develop Your Learning Style
Be familiar with your learning style. Everyone learns in different ways. If you know your own learning style, then you
have the capability to observe others. Discuss alternatives with friends or with fellow students you might be
surprised at what you find out. Armed with these insights, challenge yourself to try some new tricks. Once you
understand the style in which you most effectively learn, you will experience the most enjoyable and welcome
feeling that of being in control.
Stay Focussed
It should be clear from the above that CA examinations are qualitatively different and more demanding than the
Graduate and Undergraduate examinations conducted by the Universities. The attitudes and approaches of CA
students to their educational training should accordingly be distinctly professional.
After committing oneself to an early start, students should take a good look at the syllabus for each subject and
understand the major aim, theme, level of knowledge expected and the contents. They may jot down what they
understand of the syllabus in the relevant file. A careful survey of the syllabus and study material contents will
enable the student to size up, on a rough basis, the total magnitude of study task to be completed within the
allocated time for each subject with a compulsory provision for adequate revision, two or three times, before the
examination.
There is a plethora of articles spread over CA Journals, Seminar and Conference Books and elsewhere written by
teachers, Chartered Accountants and even students on how to prepare for CA examinations. However, it needs to
be emphasized that there are no magic formulae, quick-fix solutions or soft shortcuts for passing CA
examinations or any other examination. Students would be well-advised to examine the suggestions with a
critical, open-minded perspective and follow those which they judge to be nearer to their head and heart.
. Make goals: long/medium and short term and stick to them.
. Make a time table depending upon your aptitude and the time available.
. Maintain a strict regimen of study.
. Understanding the fundamental concepts is more important than making notes.
. Cut out disturbing factors like TV, Internet, mobile phones etc.
. Take short break after each hour of study.
Revise and Review
It is very important to study the reading materials at least 3 to 4 times. This would include:
First Reading
This will be more like a novel reading to gain overview;
Second Reading
This will be in-depth study where concepts emerge; and
Third Reading
This will be very intensive reading to fully understand the concept and to underline important points to be revised
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on examination day.
Visit Board of Studies Knowledge Portal
Make it a habit of visiting the Board of Studies Knowledge Portal. It contains all the educational inputs of the
Board of Studies like latest study materials, Suggested Answers, RTPs, supplementary study materials,
notifications etc. It also contains announcements like relevant list of publications, Accounting Standards and
Standards on Auditing etc. applicable for the examination.
Students' Journal and Other Publications
The Students' Journal is another form of disseminating important information as it provides quality articles and
academic updates that will help you in professional growth.
Attempt Past Examination Papers/Mock Test Papers
Past papers are an essential tool as they help you understand the pattern of questions. Even though, it is not
always feasible to go through every answer in every paper you are about to take, at least take time to grasp the
format - for instance, the number of questions, what is compulsory and optional, and the likely structure and
marks given. The Institute's Suggested Answers, Compilation, Practice Manual and Mock/Model Test Papers
may be very helpful for the students as they can go through the best possible answers of any problem. Not only
these publications provide you the appropriate solution to any particular problem but also enable you to have an
in-depth analysis of that problem by highlighting Examiners' Comments as well. There is no reason not to repeat
past papers as much can be learned this way. It is easy to think that once you have worked your way through the
paper and marked it from the back; this will fetch much higher marks at another attempt. You would be amazed.
Practice with as many different papers as are available. Try to arrange mock examination test on your own. Give
yourself time to read through the questions before you start working out how much time you can allocate to each
one. And set the same strict time limit for the whole paper, from start to finish, as the original examination
allowed. It is hoped that this practice will do wonders in the preparation for your actual examination. You can also
write the mock tests conducted by the various branches of the institute which would help you to simulate the
examination conditions and further the marks awarded would help you to gauge your preparation for the
examinations.
Time Management
A judicious management of time is a must as preparation needs to be sustained for long. This becomes even more
important during examination hours as you have to put the best answer in a given time framework. This is quite
challenging and calls for a very intelligent strategy to handle. Reach examination hall well in time. Plan your time
so that equal time is awarded for each mark. Keep sometime for revision as well. Always attempt to do all
questions. Remember that six average answers fetch more marks than five best answers. Therefore, it is
important that you must finish each question within allocated time.
Moment of Reckoning: Presentation of Answers
It is not enough that you prepare well, it is equally essential that you present your answers well. Following points
deserve a special mention:
. Avoid coming late for the examination.
. Relax before the examination; mind works well when it is in a relaxed state.
PREPARING FOR EXAMINATION - A SYSTEMATIC APPROACH
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Attempt those questions first which you are confident about.
Budget your time wisely; Utilise the 15 minutes reading time to the fullest advantage to prepare mentally as
to the strategy to be followed in attempting the paper; reserve at least last 15 minutes for revision purposes.
Give working notes to each practical question properly.
Give your assumptions wherever necessary.
Be precise and to the point and do not indulge in unnecessary details.
While answering questions involving application of law/standards etc, briefly state the facts, the legal
position, your analysis backed up with case laws, if any and your conclusion.
Write legibly; avoid spelling mistakes and grammatical errors.
The tendency of giving long answers to short answered questions and vice-versa should be avoided.
Make sure, as far as possible, that your answers are reasonably complete and comprehensive, that you have
met all the requirements and tied up all loose ends and there are no irrelevant discussions and details.
Adopt a blend of conceptual, professional and practical approach to attempt the questions and problems.
Examiners should get the impression that you have prepared well for the examination and tried to reach the
standard of knowledge expected of you.
Be brisk in writing the running matter portions of the answers, in making the computations, in doing the figure
work and in presenting the Accounts in prescribed formats.
Leave margin for the examiner to enter the marks.
In computational questions on Accounting, Management Accounting, Costing, Taxation Laws etc., give
detailed working notes as part of your answers. Also, wherever relevant, spell out the assumptions on which
you have based your answers.
In case of essay type answers, it is desirable to give a brief introduction and quickly proceed to discuss the
main theme and at the end, present a short summary or conclusion.
Wherever a question gives scope for alternate answers and you are aware of the possibility, you must do and
justify that.
Don't ever resort to unfair and objectionable means during the examination time like consulting reading
material or other students, trying to peep into other's answer books etc., which may land you into trouble. A
decent and dignified behaviour by each one of you will enhance the esteem and image of the entire CA
student community.
Carefully read the Institute's rules and instructions on examination and comply with them.
Do not make any distinguishing mark/appeal in the paper.
Do not panic. Coolly attempt all questions and under no circumstance leave the hall in between.
A Word of Caution
A critical assessment of the performance of the students shows that they have not been very sincere and strategic
with regard to the various papers in the examinations. However, the following points should serve as a warning to
CA students:
. The depth of the knowledge of a large number of students is shallow and is based on short notes,
booklets and oral education provided in the coaching classes in various parts of the country.
. A large number of students failed to study the “latest edition” of the Institute's study material, Practice
Manuals, Revision Test Papers and other materials relevant to the subject. It is a must to read the
Institute's material at least 3 to 4 times and undertake practical solution for ensuring success.
. A large number of students do not refer to text books. Reliance on at least one or two good text books on each
subject is essential to gain conceptual understanding of the subject.
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The original texts of the Institute publications i.e. Accounting Standards, Auditing Standards,
Guidance Notes and Statements should also be carefully studied.
The original text of the Income Tax Act, 1961, Companies Act, 1956 and other legislations should be referred
while one is studying a particular topic from the text book and / or study material to obtain the macro view.
The original full text of at least 15 to 20 leading judgments in respect of taxation and corporate laws should
be thoroughly analyzed in order to sharpen analytical and comprehending capabilities. This will also aid to
writing skills.
It has been noted and observed that all those students who take practical training seriously and undertake
various assignments sincerely, viz. business processes, internal control, accounting process and various
other aspects of the working of the clients' organizations are definitely passing in significantly larger
numbers than those who are undertaking training as a burden or who do not go to the depth of the training up
to the desired level.
It may be noted that the Institute is committed to ensure that only those students, whose concepts are clear
and who know practical application of the concepts and laws in various situations, clear the examination.
There is no substitute to self study and unless all the theoretical and practical portions of the syllabus are
gone through, success cannot be guaranteed.
An attempt has been made in the preceding paragraphs to explain to students the kind and quality of things they
have to do to prepare for and perform well in CA examinations. The purpose of explaining all this is simple. It is to
help students understand that passing the CA examination during the practical training and study period of three
years is within easy reach of all CA students. The road to success is straight and smooth with no sharp bends, no
craters, no booby-traps and not even red lights. Students have the desired amount of intellectual and
professional potential for achieving early success. The educational and training inputs and other support
services provided to the students by the Institute and its members are more than adequate to prepare themselves
for and fare well in the examinations.
Logically, when everything in the CA environment is so propitious and promising, why does it elude a large number
of CA students? There must be a missing link and that is none other than the quality and content of preparation,
presentation and performance required of CA students for success.
The suggestions, hints and tips, given in this booklet represent a modest effort to guide the students to recover the
missing link and to re-discover themselves. It is hoped that they will do both and enjoy the sweet scent of success
in CA examinations and later in their professional career.
Integrated Professional
Competence Course (IPCC)
IPCC is composed of two levels viz., Group-I and Group-II.
It comprises of Seven Papers of 100 Marks each.
Level of Knowledge: Working
Group-I
Paper 1: Accounting
Paper 2 : Business Laws, Ethics and Communication
Business Laws
60 Marks
Ethics
20 Marks
Communication
20 Marks
Paper 3 : Cost Accounting and Financial Management
Cost Accounting
50 Marks
Financial Management 50 Marks
Paper 4 : Taxation
Income Tax
50 Marks
Service Tax
25 Marks
VAT
25 Marks
Group-II
Paper 5: Advanced Accounting
Paper 6 : Auditing and Assurance
Paper 7 : Information Technology and Strategic Management
Information Technology 50 Marks
Strategic Management 50 Marks
Subject-specific Guidance
5
CHAPTER FIVE
PAPER 1: ACCOUNTING
Accounting constitutes a very significant area of core competence for chartered accountants. The paper of
'Accounting' at IPCC level concentrates on conceptual understanding of the crucial aspects of accounting. The
paper at this level aims to lay a foundation for the preparation and presentation of financial statements of sole
proprietors, partnership and companies and also expects students to have working knowledge of the principles
and procedures of accounting and their application to different practical situations.
Know your syllabus
The study material of Paper 1 'Accounting' is divided in fifteen chapters/topics based on the curriculum. The
topics covered under this paper include Accounting Standards; Financial Statements of Companies, Profit or
Losses Prior to Incorporation, Bonus issue, Amalgamation and Internal Reconstruction (excluding problems on
inter- company holding); Average Due Date, Account Current; Self Balancing Ledgers; Financial Statements of
Not for Profit Organizations; Accounts from Incomplete Records; Hire Purchase and Instalment Sale
Transactions; Investment Accounts; Insurance Claims for Loss of Stock and Loss of Profit; Issues in Partnership
Accounts; Accounting in Computerized Environment.
The syllabus of Accounting has an appropriate mix of various topics of sole proprietorship, partnership and
companies as the objective of the paper is to gain ability to solve simple problems and cases relating to such kind
of businesses.
Be familiar with the Knowledge inputs provided by the BoS
Once you are aware of the syllabus, the next step is to find and assimilate the knowledge inputs which have been
provided by the ICAI / Board of Studies, to study the paper. For better understanding of the paper, Board of
IPCC
21
Studies has provided following knowledge inputs:
1. Study Material (Volume I)
2. Practice Manual (Volume II)
3. Suggested Answers
4. Revision Test Papers
5. Mock Test Papers
6. Students' Journal for academic updates
Now, after knowing the various knowledge inputs provided by the Board of Studies, you should plan your studies.
Planning – Time Management
You are advised to plan your studies on the basis of availability of time and the course contents. Planning for study
of the paper 'Accounting' should be as such that you go through the subject atleast three times.
In Accounting, examination paper is purely practical based. Therefore, one has to do written practice of good
number of questions on each topic. So, at the time of planning the study for accounting you should keep into mind
the written practice of practical questions also. Considering the practical nature of the paper, start your studies
from the day you receive the course material. As at IPCC level you do not have to undergo article ship training,
therefore, it is suggested that you should study atleast two hours a day. By doing so, you will be able to manage
first round of complete study and two rounds of revision well before time. Your first round of study should be
completed well in advance that is atleast 3 months before your exam.
This is macro level planning about how to study but you should also plan at micro level i.e. time planning for each
and every chapter in detail - when to start and by what time the chapter should be completed. Keep some time
leverage as assimilation of the chapters may take more time than expected or planned.
Your second round of study i.e. your first revision should be over before one month of your exam. Your second
revision should be in the last month before exam so that you will be in the position to remember all the concepts.
These three rounds of study will help in boosting the confidence level for the subject and will make you mentally
prepared to appear in the examination.
First round of study
As you are aware that the syllabus of 'Accounting' covers Accounting Standards as well as other topics, so your
planning should be divided in two parts namely1. Accounting Standards
2. Other chapters of the course curriculum.
Every day when you start your study first go through the concepts which you have read last day then start learning
new concepts. Remember, out of sight, out of mind. Ideally your first study should be within 24 hours of initial
reading, the second within 1 week of reading.
Part I- Accounting Standards
As accounting standards have been introduced to you for the first time in detail at this level, therefore, it is felt that
we should give you an insight on accounting standards and how to study them.
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Accounting standards are written policy documents issued by the ICAI. It covers the aspects of
recognition,
measurement,
presentation and
disclosure
of accounting transactions in the financial statements.
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It is not necessary that each accounting standard deals with all the above aspects. There are some standards
which deal only with disclosure part like AS 1, while AS 3 deals with the presentation aspect only. However, AS 2,
6, 7, 9, 10, 13 and 14 as specified in the syllabus deal with recognition and measurement principles in specific
along with certain disclosure requirements.
Note: The examples mentioned above are with reference to accounting standards which form part of the syllabus
of IPCC Paper 1 'Accounting'. Only nine accounting standards are included at IPCC level even though there are in
effect 31 accounting standards.
Each accounting standard has certain paragraphs in bold and italics which deal with the main provisions. Other
paragraphs which are not in bold and italics are explanation to the paragraphs in bold and italics. Together the
bold and italics paragraphs and normal paragraphs constitute an Accounting standard.
Some accounting standards are generally applied to any business like AS 1, 2 6, 9, 10 and 13 while some are
industry/segment specific for example AS 7 (which will be applied only in case of construction contracts) and
some situational like AS 14 'Accounting for Amalgamation' which states set of procedures to be followed at the
time the company opt for merger.
In unit 2 of chapter 1 of our study material of 'Accounting', we have given the explanation/interpretation of the
accounting standards specified in your syllabus. Also at the end of the study material, we have reproduced the
bare text of these accounting standards for your reference. It is advised that after studying each standard
explained in chapter 1 refer the bare text of accounting standard for building strong conceptual knowledge on the
accounting standards specified in the syllabus.
PART 2 - OTHER CHAPTERS
Once you study your accounting standard portion, you may study those chapters which are purely based on
accounting standard. Such chapters are
Chapter 2 unit 2: Cash Flow Statement
Chapter 6: Amalgamation
Studying these chapters will revise your concepts on accounting standards which you have already studied in
chapter 1 and will also make you understand and apply the provisions in the questions dealing with such
standards.
Since, IPCC level is the second level of chartered accountancy course and we have a paper on 'Fundamentals of
Accounting' at CPT level also, therefore, the chapters which apply the provisions studied at CPT level (to an extent)
may be studied next. Such chapters are:
IPCC
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Chapter 9: Financial Statements of Not-for-Profit Organisations
Chapter 10: Accounts from Incomplete Records
Chapter 14: Issues in Partnership Accounts
You can then proceed studying other important chapters on company's accounts viz Preparation of financial
statements of companies, Profit or loss prior to incorporation, Accounting for bonus issue and Internal
reconstruction; one question on which is generally asked in the question paper. At the end, study small chapters
on which question ranging from 4 to 8 marks are generally asked in the examination. Such chapters include
average due date, account current, self balancing ledgers, hire-purchase and instalment sale transactions,
investment accounts, insurance claims for loss of stock and loss of profit and lastly accounting in computerized
environment.
Chapter on 'Accounting in Computerized Environment' is a theory based chapter but question asked in the
question paper is not a straight forward question. Your study should be application based so that you may
analyse the requirements of the question and answer them in a desired manner.
Use of BoS Knowledge inputs in a systematic pattern
Step 1 Study material
To lay a strong foundation of the understanding of any particular topic, study material explains the concepts of
each and every topic in detail with adequate illustrations. Study the underlying concepts and accounting
treatment specified therein analytically before proceeding towards illustrations. Keep questioning yourself until
you are absolutely clear on the topic. Solve the illustrations after understanding the topic. For example, in the
chapter of Profit or loss prior to incorporation, one has to understand the reason why profit prior to incorporation
is transferred to capital reserve and not to profit and loss account, what will be the treatment of loss prior to
incorporation etc.
Step 2 Practice Manual
After solving the illustrations given in the study material, solve the questions given in the practice manual.
Practice Manual is highly useful for the students appearing in the examination as it includes questions from past
examinations which would facilitate in thorough understanding of the chapters explained in the study material.
In accounting paper, it is very necessary that one should practice a good number of questions dealing with
different adjustments. Practice Manual will help serve this purpose. Your first round of study should cover both
Study Material and Practice Manual.
Second round of study
Step 3 Suggested answers
Your second round of study i.e. your first revision should cover practice of suggested answers of recent two to three
examinations. Suggested answers of past few examinations give you an idea of what type of questions are asked
in the examination and how to solve and present the solution for such questions in the examination. Solving the
question paper in the examination situation will help you, not only in time management but will also give you the
confidence to attempt different types of questions in the examination.
Step 4 Revision Test Papers (RTP)
After you complete revision of whole syllabus atleast once, you should solve the questions given in the RTP. For
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every examination, Board of Studies comes out with a Revision Test Paper. Revision Test Paper is issued for every
attempt containing a fresh set of questions which will help you to evaluate your preparation level. RTP of
Accounting is divided into two parts namely Part I: Recent amendments, notifications and announcements which
are relevant for that particular examination and is not given in the study material or was not applicable in the
immediate past examination. You will be able to know all such relevant information applicable for the exam at
one place. Part II carries questions and answers for your practice. In Accounting, questions on each topic are
given with full solution to enable you to get an insight on how to present the solutions in an orderly manner. In
accounting paper, RTP of past few attempts can also be referred subject to amendments for which you have to
refer the latest Study Material and RTP.
Third round of study
Step 5 Mock Test Papers
After second revision of the complete syllabus, you may assess your preparation by taking mock tests conducted
by various branches at their end. Also Mock test papers are hosted on the institute's website www.icai.org which
you may download and solve within a time period of three hours.
Important points to be kept in mind
1. Preparation of notes
Prepare concise notes in the first round of study itself. Your notes should be prepared in a manner, which
supplements your understanding of the concept and the illustrations you have solved. You may either make a
separate copy where you write down the important concepts of the chapter or can underline the important
concepts in the book itself and read those underlined portion at the time of revision. You should also shortlist the
illustrations to be revised again in your second and third round of study. Short listing of illustrations should be
based on the difficulty you faced while solving the question. Besides preparation of important points of the topic
(which will help you to recapitulate the whole concepts), a summary of tricky points and adjustments gathered
from the practice of various good illustrations may also be prepared which will help in grasping the intricate
practical aspects. Such tricky points or adjustments should be cross linked with the concerned illustration
number so that at the time of revision you not only study the accounting treatment but also refer the whole solution
again. These notes may also be accompanied by the proforma of relevant accounts and diagrams so that at the
later stages of preparation, the conceptual knowledge underlying different topics may be gained within minimum
time and efforts without going through a number of books again.
2. User of proper and prescribed format for presentation of accounts
There are some chapters which require the solution or financial statements to be presented in particular format.
You should make it a practice to adopt the prescribed formats while solving and presenting the accounts of
particular topics. For example: Financial Statements of companies should be in the format prescribed in the
Schedule VI to the Companies Act, 1956. The format of Account Current should be kept in mind while solving the
problems on that topic.
3. Recapitulation of previously read topics
The chapter of Partnership accounts was also there in the paper of 'Fundamentals of Accounting' at CPT level.
Therefore, here at IPCC level, you are required to whet your skills on this topic. Also the concepts and provisions
read at CPT level lays down the foundation for studying and understanding the topics specified at the IPCC level.
For example, concept of revenue and capital receipt and expenditure is applied in every topic while preparing the
IPCC
25
financial statements of an entity. Similarly, valuation of inventory, accounting for depreciation etc. are some of
the topics the concepts of which are applied in general to all entities.
4. Keep yourself continuously updated
We at Board of studies endeavor to update you with the latest amendments or notifications as and when they are
issued. One of the sections in the Students' Journal is on 'Academic Update' which contains recent
amendments in accounting also. You should be in a habit to read this continuously as it will help you in avoiding
last moment pressure to acquaint yourself with all the relevant amendments. Also list of publication comprising
of all relevant accounting standards and guidance notes are published well in time in the Students' Journal and
the institute's website to apprise you with the applicability part of the same in the particular examination.
5. Keep in mind the Inter-linking of various topics
The provision of accounting standards have to be kept in mind and applied while studying the related chapter
based on the particular accounting standard. If your concepts are clear relating to a particular standard, you
should not face any problem in applying the same to solve problems in an inter-connected chapter. Sometimes
even though the chapter may not directly relate to an accounting standard, it may contain adjustments involving
application of one or more standards.
We have made an attempt to explain with the help of tabular format given here under the manner in which
concepts contained in the particular chapter of the study material have to be interlinked with the related provision
in another chapter of the study material and read together:
Chapter/
Unit No.
Chapter 1
Inter-linking
Name of the
chapter/Unit
Accounting standards
.
.
.
.
Chapter 2
Financial statements
of companies
.
Nine Accounting standards have been specified in this
paper viz AS 1, 2, 3, 6, 7, 9, 10, 13 and 14.
AS 3 is on Cash Flow Statement. There is a separate
unit in chapter 2 which deals with Cash Flow Statement.
All the provisions of AS 3 will be applied while preparing
the cash flow statement of a company.
Similarly, provisions of AS 14 'Accounting for
Amalgamations' will be applied in chapter 6
'Amalgamation'.
Provisions of AS 13 'Accounting for Investments' will be
applied to an extent in chapter 12 Investment Accounts.
For example value of closing balance of investment at
the end of the accounting period will be cost or fair value
whichever is less is as per para 14 of AS 13.
Format of Schedule VI explained in this chapter is to be
applied in the financial statements of companies
required to be prepared in chapter 4 'Accounting for
26
.
Bonus Issue', chapter 5 'Internal Reconstruction' and
chapter 6 'Amalgamation'.
Cash flow statement is to be prepared as per AS 3
explained in chapter 1
Chapter 3
Profit or loss prior to
incorporation
This chapter applies the principle of periodicity read at CPT
level in the paper of Fundamentals of Accounting.
Chapter 6
Amalgamation
Provisions of AS 14 should be kept in mind while studying
this chapter.
Chapter 9
and 10
Financial Statements
of Not - for - Profit
organizations and
Accounts from
Incomplete Records
These chapters apply the provisions studied in the chapter
'Preparation of Final Accounts for Sole Proprietors' at CPT
level.
Chapter 12
Investment Accounts
Provisions of AS 2 and 13 should also be remembered while
valuing the closing balance of investment at the end of the
accounting period.
Chapter 14
Issues in Partnership
Accounts
In 'Fundamentals of Accounting' at CPT level, we had a
chapter on partnership which dealt with profit and loss
appropriation account of partnership firm, admission,
retirement and death of a partner.
Other chapters though not specifically interlinked with any chapter but still apply the provisions already read
earlier.
Tips for examination
General tips are already given in the first part of this booklet. However, we would like to also focus on following
accounting related examination tips which you should keep in mind at the time of appearing for the examination:
1. Use of proper formats
Certain statutes prescribe specific formats for presentation of the accounts. You should take care of the same
at the time of solving the questions in the exam. Accounts presented in the prescribed manner will help you in
scoring due marks.
2. Adequate Working Notes
In accounts, your solution is generally divided in two parts viz- main solution and working notes. Working notes
form part of your solution and carries marks. Therefore, it is advised that calculations made on your calculator
should also be written in your answer sheet as working note, wherever required, neatly and precisely. Also your
working note should be cross referenced with the figure used in the main solution so that examiner can easily
understand that how you have arrived at the particular figure.
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27
3. Answer the questions with due emphasis on the provisions of Accounting Standards
Support your answers/conclusions with proper reasoning. Answers for questions based on accounting
standards should be supported with provisions of that accounting standard rather than a mere common sense or
guess work. It is not required to quote paragraph number of Accounting standard but you are expected to quote
accounting standard number alongwith the name of the standard. However, if you state, paragraph number of
accounting standard, then it will add value to the solution and will also help create a good impression in the mind
of the examiner. You should quote number of accounting standard or name only when you are sure. It is better not
to quote than to misquote the accounting standard number.
4. State the assumption clearly
In case a question leaves room for making an assumption and there is a possibility of more than one assumption,
it is important to clearly state the assumption you have taken and solve the question accordingly.
PAPER 2: BUSINESS LAWS, ETHICS AND COMMUNICATION
Introduction
Any accounting student should have understanding of the legal framework, which influences business
transactions. This paper on Business Laws, Ethics and Communication has been introduced for the CA students
at IPCC level in a CA course to make the students aware of legal background relating to business and
company law. It comprises laws of practical importance in the modern business world as law is a convincing
source of bringing reasons, fairness and stability in all the mercantile dealings. Besides, in today's scenario,
ethics forms a mainstay and principle part of any profession and it is certainly necessary for the students of
Chartered Accountancy to know the value of ethics in business. Ethics is a series of values steering the
conduct of the peoples of the society. Further, a student also needs to develop good business communication
skills, as effectual communication conduct helps disseminating laws and ethics to business and society and
emphasizing a sound understanding of related legal deeds and documents.
Thus, the introduction of this paper in the syllabus serves the needs of the modern society.
Syllabus coverage
The syllabus is, therefore, comprehensive, cohesive and synchronized explanation of the statutory provisions of
the business laws including some of the labours laws and the company law, the fundamental doctrines to ethics
required in the conduct of the businesses, and the communication proficiency which is preferred for the conduct
of any business activity. The subject has been segregated into three parts with Part I covering Business Laws
and the Company Law carrying 30 marks each. This part comprises of legal provisions, numbers of case based
illustrations and important cases with view to help students to understand and apply provisions of law properly.
Part II covering Business Ethics discussing the ethical concepts and the measures to overcome the ethical
dilemmas faced by the professionals carrying 20 marks and Part III covering Business Communication carrying
20 marks dealing with communication principles, its forms and applications.
A word on subject coverage from examination perspective
Business Laws
In Business Laws and Company Law students have to focus on digesting all the major legal provisions and their
28
objectives and implications in practice. At every stage, they should prepare themselves well enough to be able to
conceptually explain the relevant provisions, principles and conditions. Students should also go through the
Bare Acts to get a better understanding of all the provisions contained in various sections and sub-sections. At the
IPCC level, it is better to start remembering some of the important sections and apply them logically in solving
practical problems. Reading leading case laws if any may also form part of your reading for enhanced knowledge.
The content of this section has been discussed in six chapters, which are as under:
1. The Indian Contract Act, 1872
Indian Contract Act, 1872 is one of the oldest laws in the Indian law regime, passed by the legislature of preindependence India. The statute contains essential principles for formation of contract along with law
relating to special contracts such as indemnity, guarantee, bailment, pledge and agency. This statute has
been incorporated in the CA-course because this is the law which forms the foundation upon which the
superstructure of modern business is built.
This chapter is divided into 9 units. The topics to be more focused from examination perspective are as follows:
Chapter/
Unit No.
1
Name of the
Chapter
Background
Topics
.
Definition, Essentials and Types of contract
Proposal/Offer & Acceptance and Rules related to
Communication
Revocation of Offer and Acceptance
.
.
2
Consideration
.
.
.
Definition & Legal Requirements of Consideration
Suit by a third party to an Agreement
Validity of an Agreement without Consideration
3
Other Essential
Elements of a
Contract
.
.
.
.
.
Free Consent
Capacity to Contract
Lawful Object and Consideration
Unlawful Object & Unlawful Consideration
Agreement expressly declared as Void
4
Performance of
Contract
.
.
.
.
.
.
By whom a Contract may be Performed
Liability of Joint Promisor & Promisee
Time and Place for Performance of the Promise
Impossibility of Performance
Contract, which need not be Performed
Discharge of a Contract
5
Breach of Contract
.
.
.
.
Anticipatory Breach of Contract
Actual Breach of Contract
Measurement of Damages
How to calculate the Damage
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6
Contingent and
Special Contracts
.
.
.
.
Contingent Contract
Rules relating to Enforcement
Quasi-Contracts
Types of Quasi-Contract
7
Contract of
Indemnity and
Guarantee
.
.
.
.
.
.
.
Contract of Indemnity
Contract of Guarantee
Nature of Surety's Liability
Continuing Guarantee
Discharge of a Surety
Rights of Surety against the Principal Debtor and
Creditor
Contribution as between Co-Sureties
8
Bailment and
Pledge
.
.
.
What is Bailment?
Duties and Rights of Bailor & Bailee
Pledge
9
Agency
.
.
.
.
.
Definition & Modes of Creation of Agency
Extent of Agent's Authority
Duties and Obligations of an Agent
Personal Liability of the Agent
Principal's Liability for Agent's act to third
parties
Irrevocable Agency
Sub-Agent & Substituted Agent
.
.
29
2. The Negotiable Instruments Act, 1881
A 'negotiable instrument' is a signed writing containing an unconditional promise to pay an exact sum of
money. It includes bill of exchange, cheque, promissory note, or other written contract for payment that may
serve as a substitute for money. It is simple in form and easy to transfer. Like commercial paper, negotiable
instruments were developed to meet the needs of trade. They are used by businessmen to facilitate long-distance
transactions and to avoid the cash transactions.
Major topics to focus
Meaning, definitions & characterstics of Negotiable Instruments
Classification of Instruments
Sight and Time bills
Negotiation, Negotiability, Assignability
Different Provisions relating to Negotiation
Rights and Obligations of Parties to an Instrument obtained illegally
Acceptance and Payment for Honour and Reference in Case of Need
Presentment of Instruments
.
.
.
.
.
.
.
.
30
3. The Payment of Bonus Act, 1965
The term Bonus means extra amount in money, bonds or goods over what is normally due. The term is applied
especially to payments to employees either for production in excess of the normal (wage incentive) or as a share of
surplus profits. The Payment of Bonus Act, 1965 intends to provide for the payment of bonus to persons employed
in certain establishments and for matters connected therewith.
. Act not to apply to certain classes of Employees (Section 32)
. Definition
. Who is Entitled to Bonus?
. Establishments to Include Departments, Undertakings and Braches (section 3)
. The First Schedule
. The Third Schedule
. Payment of Minimum Bonus (Section 10)
. Payment of Maximum Bonus (Section 11)
. Procedure for Calculation of Working Days and Proportionate Reduction in Bonus
. Special Provision with respect to Certain Establishments (Section 16)
. Special Provision with respect to Bonus Linked with Production or Productivity (Section 31A)
. Power of Exemption (Section 36)
4. The Employees' Provident Funds & Miscellaneous Provisions Act, 1952
This Act was moved by the State to ensure welfare measures for labourers. The Act carries great
importance in providing welfare measures to employees in an organization, students should know the
mechanism of this statute.
. Definition (Section 2)
. Employees' Provident Fund Scheme (Section 5)
. Employees' Deposit-Linked Insurance Scheme
. Other Provisions
5. The Payment of Gratuity Act, 1972
Gratuity is an amount (as a lump sum payment) which is paid by an employer to his employee for his past services
when the employment is terminated. In case of death of the worker, it provides financial assistance to the
members of his family for their survival, if they have no other means for support. Thus, this gratuity scheme
serves as an instrument of social security as well as a reward to a person who sacrifices his whole life for the
betterment, development and prosperity of an establishment and thereby for the Nation.
. An Introduction
. Important Definitions
. Payability of Gratuity
. Calculation of Gratuity Amount Payable
. Forfeiture of Gratuity
. Nominations for Gratuity
. Employer's duty regarding the payment
IPCC
.
31
Recovery
6. Company Law
With the intention of giving first hand working exposure in Company Law, a few chapters of the Companies Act,
1956 from Section 1 to 197 are covered. Students, at this level, have to gain a working knowledge of the
provisions of the Companies Act, 1956.
This part is divided into four units.
Unit
No.
1
Name of the
Unit
Preliminary
Topics
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2
Prospectus
.
.
.
.
.
.
.
.
.
.
Introduction on Company & Lifting of the "corporate veil"
Classes of companies under the Act
Miscellaneous provisions (Section 43-45)
Conversion of public company into a private company
Procedure for conversion of a private company into a public
company
Privileges and exemptions
When companies must be registered ?
Mode of registration/Incorporation of company
Memorandum of Association
Alteration of the Memorandum
Articles of Association
Alteration of Articles
Doctrine of Indoor Management
Preliminary / Pre-Incorporation & Provisional Contracts
Promoters
National Company Law Tribunal & National Company Law
Appellate Tribunal
Prospectus-Meaning and Role
When Prospectus is not required to be Issued (Section 56)
Requirements as to the Issue of Prospectus
Abridged form of Prospectus
Statement by Experts
Shelf Prospectus [Section 60A – Companies (Amendment) Act,
2000]
Information Memorandum Section 60B Companies
(Amendment) Act, 2000]
Mis-statement in Prospectus and its Consequences
Offer for sale or Prospectus by implication or Deemed
prospectus (Section 64)
"Small Depositors"– [Section 58AA]
32
.
.
.
.
.
.
.
3
Share Capital
.
.
.
.
.
Concept of capital & Shares
Variation of shareholders rights
Voting rights of a member
Further issue of capital (Right Share i.e., Right of pre-emption
or Pre-emptive Right)
Section 81 of the Companies Act, 1956
Alteration of share capital(Section 94)
Reduction of the share capital
Reduction vs. diminution
Issue of shares at a discount
Issue of sweat equity
Issue of securities at a premium
Share certificate & Share warrant
Calls on shares
Transfer of shares
How nomination facility shall operate in case of transmission
of shares ?
Certification of transfer (Section 112)
Blank transfers & Forged transfers
Transmission ,Forfeiture and surrender of shares
Capitalisation of profit
Debentures & Registration of a charge
.
.
.
.
.
.
.
.
.
.
.
.
.
Classification of Meetings
Meeting of Shareholders
Annual General Meeting& Extraordinary General Meeting
Powers of Company Law Board / Tribunal
Class Meetings
Procedure for Convening and conduct of General Meetings
Notice of Meeting
Special and Ordinary Business
Quorum, Proxies & Resolution
Passing of Resolution by Postal Ballot [Section 192A]
Minutes
Meeting of Debenture holders
Company Law in a Computerized Environment
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
4
Meetings and
Proceedings
Allotment of Shares
Minimum Subscription and Refund & Restriction on use of
Application Moneys
Underwriting
Purchase of own shares and financial assistance for purchase
of own shares
Whether a company can 'buy-back' its own shares ?
Membership
Service of Documents
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33
Ethics
Ethics is a “critical, essential and non-negotiable” characteristic of an effective leader and strong business ethics
is a pillar of strategic business planning and success. Today, a massive inequality exists among the nations
throughout the world, despite a five fold increase in economic growth and a twelve fold increase in global trade
since World War II. The globalised world economy faces a catastrophic series of socio-economic, political,
cultural, spiritual and environmental crises, as well as a crisis of security, and they are all threatening the fabric of
society, and life itself.
Recent corporate scandals such as, Enron, WorldCom, Tyco, Satyam, to name but a few from a long list, have sunk
the world of big business to a new level of disgraceful recklessness and irresponsibility. Examples of unethical
behavior abound in business stories around the world. And individuals witness some form of unethical behavior in
their workplace every day. Unethical behaviour, where people deliberately intend to harm themselves or others,
develops from and is reinforced by, destructive states of mind, including fear, greed, anger and envy. In contrast,
ethical behaviour enhances the well-being of everyone because it is developed from and reinforced by strong
motives and emotions such as love, joy, generosity and compassion.
The greed-motivated neo-liberal world is spinning out of control. Perhaps, it is high time to redefine our values.
Knowing what is right is very important to personal and business ethics. Doing what is right is absolutely critical to
personal and business ethics. A strong unwavering commitment to core values and guiding principles of business
or organization will lead to the right ethical decisions and actions. In the absence of these actions, all one has is
good intentions and that simply is not enough for the holistic growth of the mankind.
As part of the learning process, the students in this section are exposed to an introduction to business ethics,
corporate governance, corporate social responsibility, and issues relating to environment, ethics in workplace,
marketing, accounting, finance and protection of consumer.
Chapter
No.
Chapter Name
Topics
7
Principles of
Business Ethics
.
.
.
.
.
Introduction
Ethics & Morals
Need for Business Ethics
Ethical Dilemmas
Benefits of Business Ethics
8
Corporate
Governance and
Corporate Social
Responsibility
.
.
.
.
Introduction
Stakeholders
Corporate Governance-Developments Abroad
Corporate Social Responsibility & its benefits
9
Workplace Ethics
.
.
.
Factors Influencing Ethical Behaviour at Work
Ethical Issues
Discrimination & Harassment
34
.
.
Importance of Ethical Behaviour at the Workplace
Guidelines for Managing Ethics in the Workplace
10
Environment &
Ethics
.
.
.
.
Sustainable Development
Pollution and Resource Depletion
Business & Environmental Ecological Ethics
Eco-Friendly Business Practices
11
Ethics in
Marketing and
Consumer
Protection
.
.
.
Behaving ethically in marketing
Healthy competition and protecting Consumer's interest
Consumer Protection Councils in India
12
Ethics in
Accounting and
Finance
.
.
.
.
.
.
.
Introduction
Ethical Dilemma & Potential Conflicts
Creating an Ethical Environment
Reasons for Unethical Behaviour
Threats & Examples of circumstances creating the threats
Safeguards
Ethical conflict resolution
Communication
Communication is an integral part of our professional life. We cannot do away with communication.
Communication is a sine qua non for any business activity. With the emergence of new technological advances in
information and knowledge, an important skill that is required is creating an environment that enables the
business to connect and have contacts with its stakeholders. To build long lasting business relationships with
the customers, communication should be clear, crisp and with clarity. To achieve success, professionals need to
assess and respond to communication situations that occur constantly. Business Communication usually
starting with oral form need to be materialized in a written form in the form of deeds and documents for which
model varies with the nature of agreement.
The courseware of this subject has been designed in such a manner that it does not only suffice your examination
needs but also enable you to sharpen your professional skills as well. This section introduces the students to the
elements of communication, communication in business environment and the preparation of legal deeds and
documents. Generally, students feel themselves in comfort zone while dealing with this part. This part is a very
important part to increase your overall tally in the paper. But at the same time you should be careful in your basic
understanding.
IPCC
Chapter
No.
Chapter Name
Topics
13
Essentials Of
Communication
.
.
.
.
.
.
.
.
Introduction
The Process of Communication
Formal Communication
Informal Communication
Communication Media
Non-Verbal Communication
Benefits of Effective Communication
Planning Business Messages
14
Interpersonal
Communication
Skills
.
.
.
.
Principles & Functions of Interpersonal Communication
Active Listening & Critical Thinking
Emotional Intelligence
Competencies Associated With Emotional Intelligence
15
Group Dynamics
.
.
.
.
.
.
Characteristics of Groups
Group Dynamics
Types of Groups in Organisations
Handling Group Conflicts
Consensus Building
Negotiation and Bargaining
16
Communication
Ethics
.
.
Ethical Communication & Organization Values
Ethical Dilemmas & Guidelines to handle Ethics Dilemma
17
Communicating
Corporate
Culture, Change
and Innovative
Spirits
.
.
.
.
Corporate Culture &Elements of culture
Change & Resistance to Change
Barriers To Innovation
Building Innovation Enabled Organization
18
Communication In
Business
Environment
.
.
Specimen of Notice & Minutes of Meeting
Circulars ,Press Releases & Corporate Announcements by
Stock Exchanges
19
Basic
Understanding of
Legal Deeds and
Documents
.
.
.
.
.
Partnership Deed
Power of Attorney
Lease Deed & Gift Deed
Affidavits & Indemnity Bond
Annual Report of a Company
35
36
How to Plan for Examination
Since the level of knowledge required at this level for the subject is 'working knowledge' and the objective is to
gain knowledge of those branches of laws relating to business transactions, students need to prepare and
become conversant with practical application of the law in commercial situations. Abstract reading of the law in
the form of theory will not help in complete understanding of the subject. They have to focus their study based on
the legal provisions, case laws, if any, and understand their practical implications. Besides, students should also
give importance to the terms/definitions for proper conceptualization of the answers.
Students should also go through the Bare Acts to get a better understanding of the provisions contained in
various statutes. It is desirable to support answers with relevant sections and leading case laws on the matter
wherever necessary.
Handling of Paper
While attempting practical/application oriented questions, students should be able to pinpoint the legal points
or issues involved in any statement, problem or situation given in the question, explain the relevant legal
provisions clearly, correlate the legal provisions to the given statement or problem or situation and cite the
relevant case law in support of their reasoning.
A common comment of examiners in the Law paper is that candidates are generally weak in their working
knowledge of basic concepts and provisions of the relevant laws as well as in language and writing skills. It is
therefore suggested that students may go through the comments given by the examiners which are available in
the suggested answers of each examination and do the necessary follow-up action to remove their shortcomings
and improve their knowledge and performance.
A. Practical /problem based question
Specimen of Question & Answer
Mr. Singh, an old man, by a registered deed of gift, granted certain landed property to A, his daughter. By the
terms of the deed, it was stipulated that an annuity of Rs.2, 000 should be paid every year to B, who was the
brother of Mr. Singh. On the same day A made a promise to B and executed in his favour an agreement to give
effect to the stipulation. A failed to pay the stipulated sum. In an action against her by B, she contended that since
B had not furnished any consideration, he has no right of action.
Examining the provisions of Indian Contract Act, 1872, decide, whether the contention of A is valid?
Answer
I. Name of the Act and the provision by which it is governed
Problem as asked in the question is based on the provisions of the Indian Contract Act, 1872 as contained in
section 2(d) and on the principle 'privity of consideration'. Consideration is one of the essential elements to
make a contract valid and it can flow from the promisee or any other person. In view of the clear language used in
defining 'consideration' in Section 2(d) “…. the promisee or any other person…..”, it is not necessary that
consideration should be furnished by the promisee only. A promise is enforceable if there is some consideration
for it and it is quite immaterial whether it moves from the promisee or any other person.
II. Reference of any case law, if any for quality of the answer though not effecting on the scoring of the answer
The leading authority in the decision of the Madras High Court in Chinnaya Vs. Ramayya (1882) 4 Mad 137.,
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37
wherein it was held that the consideration can legitimately move from a third party and it is an accepted principle
of law in India.
III. Co-relation of the legal provisions to the given statement/problem in a question
In the given problem, Mr. Singh has entered into a contract with A, but Mr. B has not given any consideration to A
but the consideration did flow from Mr. Singh to A and such consideration from third party is sufficient the enforce
the promise of A, the daughter, to pay an annuity to B. Further the deed of gift and the promise made by A to B to
pay the annuity were executed simultaneously and therefore they should be regarded as one transaction and
there was sufficient consideration for it.
IV. Conclusion
Thus, a stranger to the contract cannot enforce the contract but a stranger to the consideration may enforce it.
B. Theoretical questions
For the theoritcal question, the answer should be laid down by highlighting the main points with brief description
given in small paragraphs for making answer appealing.
Specimen of Question & Answer
What are the different manner of non-verbal communication?
Answer
One may continue to communicate non-verbally through:
Kinesics or Body language: All our bodily movements, gestures, postures etc., are guided by our feelings and
thought processes. The nodding of our head, blinking of our eyes, waving of our hands, shrugging of our shoulders
etc., are expressions of our thought and feelings. All these movements are the signals that our body sends out to
communicate.
Paralanguage: The term paralanguage is used to describe a wide range of vocal characteristics like tone, pitch,
and speed etc – vocal cues that accompany spoken language which help to express and reflect the speaker's
attitude.Speaker uses a vast range of vocal cues like:
(a) Pitch Variation
(b) Speaking
(c) Pause
(d) Volume variation
(e) Non- fluencies
(f) Word Stress
Artificial Communication : It is well known that we react to people on the basis of their appearance. The use of
personal adornment like clothing , accessories, makeup, hairstyle etc. provides important non verbal cues about
one's age, social and economic status, educational level, personality etc.
Proxemics : refers to the space that exists between us when we talk or relate to each other as well the way we
organize space around us. We can also call it 'space language”.
38
Chronemics or Time language: is the study of how we use time to communicate. Punctuality is an important factor
in time communication. Misunderstandings or disagreements involving time can create communication and
relationship problems.
Haptics: is communication through touch .How we use touch sends important messages about us. It reveals our
perceptions of status, our attitudes and even our needs.
Silence: The absence of paralinguistic and verbal cues also serves important communicative functions.
Last but not Least “Writing Put The Finishing Touché”
Students often feel that reading, understanding and familiarizing with the subject is enough. The process does
not end there. After reading and before the examination, one may test self by way of undertaking a mock test
under examination conditions. This may be done by attempting a model/previous year examination question
paper and comparing with the suggested answers. By this, you can examine how far you are recapitulating the
subject, of course, the time in completion of the paper. The exercise may be painful at the beginning but if one
takes it seriously he/she will realize its privileges.
PAPER 3: COST ACCOUNTING AND FINANCIAL MANAGEMENT
PART I: COST ACCOUNTING
Introduction
Cost Accounting and Financial Management is a subject which consists of two parts i.e. Cost accounting and
Financial Management. The Cost Accounting part deals with basic concepts of Cost Accounting, elements of
Cost, various methods of Costing and application of costing techniques. The basic objective of Cost Accounting
part is as follows:
(a) To understand the basic concepts and processes used to determine product costs,
(b) To be able to interpret cost accounting statements,
(c) To be able to analyse and evaluate information for cost ascertainment, planning, control and decision
making, and
(d) To be able to solve simple cases.
Outline of the Syllabus
The entire syllabus of the Cost Accounting part has been divided into ten chapters. The topics covered under these
chapters are:
1. Basic Concepts, 2.Material, 3.Labour, 4.Overheads, 5.Non Integrated Accounts, 6. Method of Costing (I),
7.Method of Costing (II), 8.Standard Costing, 9. Marginal Costing, 10.Budgets and Budgetary Control
Chapter specific
.
In the first chapter 'Basic Concepts', overview of all the concepts of Cost Accounting needs to be
understood. The major parts which need to be understood are definitions and different terminologies used in
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Cost Accounting and the context in which these are normally used. You are required to understand the
objectives and importance of Cost Accounting system and its installation in industry, relation between Cost
Accounting with other fields of study and its synchronisation with other related department/ stake holders to
assist the management of the Organisation. Classification of cost, various elements and components of
cost and various costing methods used in different industries need to be studied carefully. Theoretical
questions are generally asked from this chapter almost in every examination. To answer these questions
conceptual clarity and visualisation of practical life examples are necessary.
.
The second chapter 'Material' is very important for the students. Students shall understand the concept,
need and importance of materials in production system, various procedures involved in procuring, storing
and issuing of material. You must know the treatment of excess/ shortage of stores and valuation of store to
be received, issued & stock at hand. Components which should form part of value of material should be
understood; you may refer illustrations given in the Study Material. Generally problems on EOQ are solved
using formula but some time instead of using formula answer to the question is required to be done in tabular
format as shown in the Study Material. You should also learn to draft format of Store Ledger under different
valuation methods and accounting treatment. Treatment of normal and abnormal loss of materials, waste,
scrap, spoilage and defectives in the Store ledger to be understood to arrive at correct stock position and its
respective value. You should clearly know the differences between Simple average method and weighted
average method of stock valuation. To avoid any confusion you should read the question carefully and
understand the calculation under two methods of Valuation.
.
In the third chapter 'Labour' students shall learn and understand the need of labour cost control, methods of
attendance and payroll preparation procedures. Treatment of idle time and overtime both as normal and
abnormal should be clearly understood by you. Students may also refer various illustrations given in the
Study material for better and clear understanding. Labour Turnover is a term which can be heard in almost
every Industry; you should understand what exactly, labour turnover is, reasons for labour turnover and its
impact on an organisation's productivity directly and on image indirectly. Be conversed with various
methods of computing labour turnover and Incentive plans to the workers. Students should be acquainted
with of different systems of wage payment and Incentives through practicing different types of problems. In
examination generally questions are asked to compute Incentives based on a particular incentive plan or
make comparison between two given plans. Students are advised to avoid selective study like only Rowan or
Halsey method of bonus plan.
.
The fourth chapter 'Overheads' in which students shall understand the meaning and difference between
direct cost and indirect cost i.e. overheads. Overheads are generally associated with more than one
department or product line. Overheads are distributed amongst the concerned departments/ product lines
using a basis. Distribution of overheads is called allocation of overheads or apportionment of overheads or
absorption of overheads. Understanding the meaning and differences among the terms such as allocation,
apportionment and absorption of overhead is important for conceptual clarity. As stated above overheads
are allocated/ apportioned/ absorbed using some basis e.g. primary distributions are done using labour
hours, machine hours, floor area, capacity, number of staff etc.
Students should be versed with treatment of under absorption and over absorption of overheads through
application of supplementary rate while ascertaining the cost of a particular product or department. You
40
should also learn different methods of secondary distribution and calculation involved therein. Students
should do thorough practice to avoid computational errors. Some time questions are related with capacity
determination, in this regard students should be familiar with terms such as Installed/ Rated capacity,
normal capacity, practical capacity, actual capacity etc. Question may be asked to calculate idle capacity
and/or cost.
.
In the Fifth chapter 'Non-Integrated Accounts' students shall acquainted with both Integrated and NonIntegrated systems of accounting and different ledgers account to be opened under the two methods of cost
accounting. You should know the reasons for the differences between profit as per the financial accounting
and the cost accounting and ways to reconcile it. Accounting treatment of over absorption and under
absorption of overheads should be understood.
.
The sixth chapter i.e. 'Method of Costing (I)' consists of Job Costing, Contract Costing, Batch Costing,
Operating Costing and Multiple Costing. Here students should understand the meaning and distinctive
features of above mentioned methods of costing and the accounting procedures to be applied in the above
mentioned different methods of costing. Students shall be conversed with the adjustment of opening and
closing stock of raw material, work in process and finished goods while preparation of Job/ Batch cost sheet.
In Contract Costing profit from the contract is recognised using percentage of completion method.
To arrive at it various factors such as Value of contract, Cost of Work certified, work uncertified, retention
money, cash received should be understood. Computation of notional profit and estimated profit shall be
learned. You should understand effects of escalation clause both to contractor and contractee and revision
of work certified.
.
The seventh chapter 'Method of Costing (II)' consists of Process Costing, Operation Costing, Joint Products
and By Products. Area of application of the above costing methods and accounting difference among these
should be understood. Process Costing method is followed in an industry where a product passing through
various identifiable processes, where output of one process becomes the input of succeeding process and so
on till it reaches its final shape. Students should be able to identify each process and related cost.
Production being a continuous process where some incomplete (work in process) stock remains a
possibility. To find out accurate cost incurred and output for a given period 'Statement of Equivalent
Production' is prepared. Students should be able to calculate equivalent production for a given period with
the use of any methods of inventory valuation. Students may refer illustrations given in the Study material for
practice and clarity. One most important area of calculation is the treatment of normal loss, abnormal
losses/ gains, adjustment for scrap in ascertainment of actual abnormal loss/gain.
Some time more than one final products are obtained from a common process or input. Students shall know
the treatment of joint cost to joint products for stock valuation purposes. Joint costs are apportioned using
various methods such as based on sales value or based on volume etc. students may refer illustrations given
in the Study Material for clear understanding. Some time questions may be asked on selling price at which a
particular product can be sold or should be sold after further processing. Various illustrations have been
given in the Study materials showing this type of calculations. Similarly all other methods such as operation
costing and costing for By Products should be understood.
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.
The eighth chapter is 'Standard Costing'. First of all students should understand the meaning of standard
cost and what is actual cost. The difference between standard values with actual value is called variance;
Variances are calculated using some rational and conventional formulas. Formulas and its logical interlinks
for finding out variances should be understood. Mere mugging up of formulas without proper understanding
of its relationship will not going to help, as this chapter is just an introduction, clear understanding will
definitely help students at Final level where numerical are based on practical situations. Students should
also understand the accounting procedures and disposition of variances. Classification of variances and
interrelationship could be understood from the chart given in the study material. This chapter requires lots of
practice.
.
'Marginal Costing' is the ninth chapter of Cost Accounting at IPCC level and is one of the most vital chapter.
Basic marginal equations and formulas should be understood. Students should be able to extract Profit
Volume Ratio (P/V Ratio), Break Even Point/ sales, margin of safety, contribution, bifurcation of fixed cost
from semi variable cost. Difference between marginal costing and absorption costing should be understood
as some time you are required to reconcile figures from one method to another. Specimen Income Statement
given in Study material is very helpful for clear understanding of the differences and treatment.
.
In tenth chapter 'Budgets and Budgetary Control', objectives and importance of budgets and budgetary
control, advantages and disadvantages of budgetary control should be understood. You are also required to
learn the difference between various types of budgets and process of preparation of budgets. Generally
preparation of flexible budget segregation of fixed cost and variable cost is required, so segregation
techniques should be learnt (also discussed in Chapter-1). It is important for the students to understand
inter linkage among different functional budget while answering question on functional budget. You may
refer illustrations given in the Study Material.
PART II: FINANCIAL MANAGEMENT
A. Introduction
This paper introduces you to the basic concepts, theories and techniques relating to Financial Management and
aims to develop your ability in understanding the different concepts and their application in the real life
situations. It also provides you with an opportunity to draw upon previous experiences and education to apply
various business concepts and analytical tools to complex problems and issues in organisational settings.
The paper aims to achieve the following basic objectives:
(a) To develop ability to analyse and interpret various tools of financial analysis and planning;
(b) To gain knowledge of management and financing of working capital;
(c) To understand concepts relating to financing and investment decisions; and
(d) To be able to solve simple cases.
To begin with, you need to understand the scope, objectives and importance of financial management and its
relationship with other disciplines followed by the concept of time value of money. These two topics lay the
foundation for financial management and find an application in almost every area of study of the subject. After
having an in-depth understanding of these two topics, you should start preparing for the other subject areas like
42
tools and techniques of financial analysis and planning, financing and investment decisions, types of financing
and working capital management. All these topics are inter-related. Concepts of one topic are frequently used in
another and so a student is advised to give equal weightage to each topic while preparing for the examination. For
example, various tools and techniques of financial management namely ratio analysis, cash flow analysis and
funds flow analysis are used to analyse the financial health of a company while the different sources of finance
available to business enterprises to cater to their diverse requirements helps them in taking financial decisions,
namely, financing, investment and working capital management.
The syllabus of Financial Management may be segregated into Three parts for the purpose of its full coverage and
study.
Topics
Part A
It comprises of the following topics:
1. Scope and Objectives of Financial Management
2. Time Value of Money
3. Financial Analysis and Planning
Part B
4. Financing Decisions
5. Investment Decisions
Part C
6. Types of Financing
7. Management of Working Capital.
You can, however, decide for yourself the sequence of topics to be followed while preparing. Many of the areas are
practical-oriented and, therefore, require intense practice of solving numerical questions. On the other hand, the
theoretical portion needs to be understood in such a way so as to apply the concepts while making decisions.
B. Planning for Your Study
Emphasis on Theoretical Portion
There are certain chapters/units which are wholly theoretical in nature like Scope and Objectives of Financial
Management, Types of Financing and Financing of Working Capital. These chapters need equal focus as they form
the basis of many concepts which you will learn in the later chapters.
Chapter One: Scope and Objectives of Financial Management
This being the first chapter, it introduces you to the area of Financial Management. It discusses the evolution,
importance, scope and objectives of Financial Management and how this area is inter-related with other subject
areas. This chapter is of utmost importance as it deals with the fundamentals of Financial Management. Without
a clear understanding of the fundamentals the remaining chapters will not be easy to grasp. Therefore,
knowledge of the background, the environment to which this paper relates, is important as it helps to put
everything learnt later into appropriate perspective.
Chapter Five: Types of Financing
In this chapter you have to study the different sources of finance and their usage in making sound financial
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judgments. This chapter deals with long-term, short-term and international sources of finance. It helps you to
understand the basics of different forms of finance and their importance therein. Most of the issues discussed in
this chapter have practical implications in real life like where to get funds from for starting up, development or
expansion of a business and these decisions are crucial for the success of the business. It is also important,
therefore, that you understand the various sources of finance open to a business and are able to assess how
appropriate these sources are in relation to the needs of the business. The concepts learnt here find application
almost in all the other chapters as well.
Example: A decision regarding a particular source of finance is taken in Chapter Six on Investment Decisions
when a company wants to invest in new machinery, which has a high cost and capital is required to source the
fund.
Generally, you tend to pay less attention to theory chapters and the theoretical concepts of underlying different
topics. But it is very pertinent that you have thoroughly studied the theoretical aspects of the subject so that they
help you in understanding the concepts and logic behind the mathematical workings and formulae while solving
problems related to that particular concept.
Solving Practical Problems
You should be able to adopt the correct approach of solving the numericals using shorter approaches that require
a little 'think before attempt' approach instead of lengthy procedures. You need to have conceptual clarity before
attempting the questions. You should be able to understand how various concepts/figures are related to each
other. This requires a lot of practice of solving such questions to develop this understanding without which, it
would almost be impossible to achieve positive results in the examination. It appears that you either utilise too
much of your time solving questions, without actually understanding the theories underlying the problems, or
resort to selective studying.
Some outlines of the chapters which require extensive practice as they are practical-oriented are discussed for
your better understanding. It also discusses how the different chapters are inter-related to each other and how
the concepts studied in one chapter are relevant and applicable in other chapters as well.
Chapter Two: Time Value of Money
This chapter basically tries to impart you the concept and importance of monies worth today as compared to in
the future. It talks about present value and future value of your money or investment. It discusses the concept of
opportunity cost and the importance to know how to compute the time value of money so that you can distinguish
between the worth of investments that offer you returns at different times. This chapter is of utmost importance as
other chapters will expand on the concepts learnt in this chapter. For instance, time value concept forms the basis
of all the modern tools and techniques of capital budgeting decisions like net present value (NPV) method,
internal rate of return method (IRR) to name a few dealt in Chapter Six under Investment Decisions.
Chapter Three: Financial Analysis and Planning
This chapter requires loads of reading to understand the concepts and thorough practice of the problems. The
first unit deals with ratio analysis. Here you need to understand the different types of ratios and their significance
alongwith their application in decision-making scenarios. The second unit deals with cashflow and funds flow
statement analysis. This chapter draws a lot from the paper of Accounting present in the same group. You should
be conceptually clear with respect to the topics covered here as they create a stepping stone for you for
44
understanding and implementation in further chapters.
Example: The acid test ratios are used in the Chapter Seven on Management of Capital Management. These ratios
demonstrate a firm's ability to manage its resources in an efficient manner. Capital structure ratios like equity,
debt, debt-equity are revised in the Unit II: Capital Structure Decisions under Chapter Four on Financing
Decisions. Similarly, funds flow analysis is an important aspect of Chapter Seven on Working Capital
Management while estimating working capital required by a firm in the future.
Chapter Four: Financing Decisions
This chapter covers the concept and significance of cost of capital, capital structure decisions and leverages.
Cost of capital has relevance in almost every type of financial decision making.
Examples: While deciding the acceptance or rejection of an investment proposal, cost of capital is the major
yardstick. It is also vital in designing a firm's capital structure as one of the important criteria is to minimise the
cost of capital. Again, it helps in deciding the method of financing to be used.
Leverages help in understanding what change in a firm's policy in terms of say increase or reduction in the
number of units it is producing or whether the firm should rely more or less heavily on borrowed money, etc affect
the risk and return scenario of the firm.
The concept of financing mix has utility while deciding upon the hurdle rate for capital budgeting decisions under
Chapter Six on Investment Decisions. Needless to say, this chapter too has applications in real life situations and
requires thorough understanding of the concepts underlying each topic. Being a practically-oriented chapter, you
need to practice a lot.
Chapter Six: Investment Decisions
The capital budgeting decisions are essential, fundamental and critical business decisions of a firm. Since these
decisions need huge amount of capital outlay, are surrounded by great number of uncertainties and have longterm implications, therefore, there is an underlying need for thoughtful and correct decision-making. Capital
budgeting decision-making is a difficult and complicated exercise for the management. These decisions require
an overall assessment of future events which are quite uncertain. The basic concept underlining these decisions
is investing in assets and projects which provide a greater return as compared to the minimum acceptable rate.
This minimum acceptable rate also known as “hurdle rate” should be higher for riskier projects and should also
reflect the financing mix used. Returns on projects should be measured based on cash flows generated and the
timing of these cash flows. Both the positive and negative side effects of the projects should also be taken into
consideration before a decision is taken. In this chapter you will not only study the importance of investment
decisions but will also learn about the different tools and techniques which help in arriving at a sound financial
decision. For instance, Net Present Value (NPV) represents the total value added or subtracted from the
organisation if we invest in a particular project. Another method is Internal Rate of Return (IRR) which helps to
determine the rate of return earned by a project.
One very pertinent concept of capital budgeting is what is relevant. For example, say what is relevant to a project
cash flow? One of the main answers is Depreciation-Capital assets are subject to depreciation and you need to
account for depreciation twice in your calculations of cash flows. Depreciation is deducted once to calculate the
taxes paid on project revenues and then it is added back to arrive at cash flows because it is a non-cash item.
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Chapter Seven: Management of Working Capital
This chapter introduces you to the concept of working capital management. Working capital is the capital needed
by a firm for its day-to-day activity. From a company's point of view, excess working capital means operating
inefficiencies. Say for example, company's money that is tied up in inventory or the amount of money that
customers still owe to the company cannot be used to pay off any of the company's obligations, therefore, if the
company is not operating in the most efficient manner, it will show up as an increase in the working capital. Here
you also study the management of cash, marketable securities, accounts receivables management, account
payable, accruals and different means of short-term financing.
Two most important points to remember while studying working capital management are:
(a) The optimal level of investment in current assets, and
(b) The appropriate mix of short-term and long-term financing used to support this investment in current assets.
The chapter also delves upon the different approaches to management of working capital with the objective of
maintaining optimum balance of each of the working capital components.
Examples: Here the concepts of ratio analysis, which you have studied in Chapter Three, can be used to monitor
overall trends in working capital and to identify areas requiring closer management.
For computing the optimal level of Current Assets, you need to apply the ratio analysis concepts. As studied
earlier, an ideal current ratio is 2. This means that the current ratio of 2 is considered as a safe margin of solvency
due to the fact that if the current assets are reduced to half i.e. 1 instead of 2 then also the creditors will be able to
get their payments in full. A very high current ratio is not desirable as it means less efficient use of funds by a
company.
Similarly, the different forms of financing which you have gone through in Chapter Five on Types of Financing also
have an implication in this chapter. Here the sources of short term financing are re-visited.
PAPER 4: TAXATION
PART I: INCOME TAX
Income-tax is a direct tax i.e., it is a tax levied directly on the income of a person. Income-tax, at the IPCC level,
largely involves application of provisions of the Income-tax Act, 1961 to solve computational problems, and, is
therefore a very interesting, and at the same time, a dynamic subject, on account of the major changes which take
place in the income-tax law every year.
Since the subject of income-tax is new to you, it is essential that you need to have an idea of the constituents or
elements which make up the income-tax law. You also need to understand the basic concepts, especially, the
concept of “income”, on which tax is levied under this Act. The concepts of “assessment year” and “previous year”
are equally imperative. Most importantly, you need to comprehend the manner of computation of total income,
on which income-tax is levied.
We have made an attempt to explain the above in the ensuring paragraphs in order to enable you to have a broad
46
understanding of the constituents of income-tax law, the fundamental concepts and the manner of
determination of total income and tax liability. Thereafter, you would be able to appreciate the scope of syllabus
of this subject at the IPCC level.
Point 1: Be acquainted with the elements or constituents of income-tax law
The income-tax law, which governs the levy of income-tax in India, has the following elements or constituents 1. Income-tax Act, 1961
The main source of income-tax law is the Income-tax Act, 1961.
The Act is divided into sections; the sections are grouped under Chapters. The Act also contains Schedules.
Many of the sections are further divided into sub-sections, clauses and sub-clauses, which are denoted
within brackets.
For example, if we have to refer to section 80D, sub-section (2) clause (b), the same should be written as
section 80D(2)(b).
.
.
.
2. Income-tax Rules, 1962
Rules are necessary for carrying out the purposes of the Act.
The Act gives power to the authority responsible for implementation of the Act to make appropriate rules.
The Central Board of Direct Taxes (CBDT) governs the administration of Income-tax Act, 1961 in India, for
which purpose it frames rules from time to time.
. These rules together form the Income-tax Rules, 1962.
.
.
.
3. Annual Finance Act
The Finance Bill is introduced in the Parliament every year for implementing the tax proposals in the Union
Budget.
. When the Finance Bill is approved by the Parliament and gets the assent of the President, it becomes the
Finance Act.
. The amendments are made every year to the Income-tax Act, 1961 and other tax laws by the Finance Act.
. The First Schedule to the Finance Act contains four parts which specify the rates of tax . Part I of the First Schedule to the Finance Act specifies the rates of tax applicable for the current
Assessment Year.
. Part II specifies the rates at which tax is deductible at source for the current Financial Year.
. Part III gives the rates for calculating income-tax for deducting tax from income chargeable under the
head “Salaries” and computation of advance tax.
. Part IV gives the rules for computing net agricultural income.
.
4. Circulars/Notifications
Circulars are issued by the CBDT to clarify the meaning and scope of certain provisions contained in the Act.
Notifications are issued by the Central Government to give effect to the provisions of the Act.
For example, under section 80CCF, deduction is available in respect of notified long-term infrastructure
bonds. Therefore, the bonds which qualify for deduction under this section are specified by the Central
Government through Notifications.
.
.
5. Case law decisions
. The various issues which arise out of the provisions of the Act are decided by judicial forums.
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The decisions of the Courts interpreting the provisions of the law also form an important
constituent of income-tax law.
Note - Case laws, are however, dealt with only at the Final level and not at the IPCC level.
.
Point 2 - Understand the fundamental concepts of income-tax law
Concept of “income”
Since you would be studying income-tax for the first time, it is essential that you understand the concept of
“income” under the Income-tax Act, 1961. The concept of “income” under the Income-tax Act, 1961, is not the
same as what is generally understood as “income” in common parlance.
An exhaustive definition is one which confines the scope to what is contained in the definition, whereas an
inclusive definition does not limit the scope to what is mentioned in the definition.
The definition of “income” as per section 2(24) of the Income-tax Act, 1961, begins as “income includes ……”.
The definition of “income” is, therefore, inclusive and not exhaustive. This implies that the scope of income is not
confined only to the income which are mentioned in section 2(24).
In Common Parlance
Under the Income-tax Act, 1961
Income is understood as a
regular monetary return
from specified sources.
Income also includes casual income like winnings from
lotteries, crossword puzzles etc.
2. Normally, only revenue
receipts are considered as
Income.
Capital gains on transfer of assets are specifically included in
the definition of income.
3. Income means the actual
income i.e. gross receipts
less expenditure incurred.
Income is also calculated applying a presumptive rate on
gross receipts, in certain cases, for example, an individual
carrying on civil construction business with gross receipts of
Rs.50 lakh, can calculate his income by applying the
presumptive rate of 8% on Rs.50 lakh, even though his actual
income may be higher.
4. Income generally refers to
real income.
Even notional income is treated as income, if specifically
provided under the Act i.e. annual value of a property which is
not actually let out but is deemed to be let out is chargeable to
income-tax.
5. Income connotes the gross
receipts after deducting
actual expenditure incurred
to earn such receipts.
The deductions specifically provided for under the Income-tax
Act, 1961 can alone be reduced to compute income.
1.
Also, if there are any restrictions on the quantum of deduction
allowable under the Act, the deduction would be allowed
48
subject to such limits. For instance, in case of salary income,
transport allowance is allowable as deduction only up to
Rs.800 per month, even though the employee may have
actually incurred more than Rs.800 p.m. and may be getting a
higher transport allowance.
Sometimes, deduction may be allowed for a higher sum than
actually incurred. For example, weighted deduction @200%
is allowable in respect of in-house scientific research
expenditure incurred by a company.
6. Income is generally
considered to belong to the
person who receives the
same.
Income-tax Act, 1961 has specific provisions including the
income of one person in the hands of the other, in certain
circumstances, like including income of a minor child in the
hands of the parent.
Concept of “Previous Year” & “Assessment Year”
These concepts are fundamental to understanding the provisions of Income-tax law.
Previous year (P.Y.) is the financial year ending on 31st March, in which the income has accrued/received. Income
earned during the previous year is chargeable to tax in the Assessment year.
Assessment year is the financial year following the previous year. Assessment year means the period of twelve
months commencing on the 1st April every year.
For example, income earned during the P.Y. 2011-12 is chargeable to tax in the A.Y. 2012-13. Therefore, for the
A.Y.2012-13, the relevant previous year is P.Y.2011-12.
Concept of “person”
The levy of income-tax is on every “person”. The definition of “person” is, again, inclusive. It includes an
individual, a Hindu Undivided Family (HUF, in short), a company, a firm etc.
Concept of “assessee”
For the time being, to have a broad understanding, you should know that assessee means a person by whom tax or
any other sum of money is payable under the Income-tax Act, 1961. The other parts of the definition of
“assessee” are given in your Study Material.
Point 3: Understand the process of computation of total income and tax liability
Income-tax is a tax levied on the total income of the previous year of every person. The levy of income-tax is,
therefore, on the total income of the assessee. The total income has to be computed as per the provisions of the
Income-tax Act, 1961 in the following manner -
IPCC
1. Ascertain residential status
.
.
.
.
2. Exclude income which do
not form part of total income
.
.
.
3. Identify & Group income
under the respective head
.
.
.
.
In case of an individual, the number of days of his stay in
India during the relevant previous year and/or the earlier
previous years would determine his residential status.
An individual/HUF can be either a . Resident and ordinarily resident
. Resident but not ordinarily resident
. Non-resident
Persons, other than an individual and HUF, can be either
resident or non-resident.
An Indian company is resident in India.
The determining factor for every other assessee is the
place where the control and management of its affairs
are situated during that year i.e., whether in India or
outside India.
The residential status of a person determines the scope
of his taxable income.
For example, income which accrues outside India and is
received outside India is taxable in the hands of a
resident and ordinarily resident but is not taxable in the
case of a non-resident.
Exclude income which do not form part of total income,
like, agricultural income, dividend income from domestic
companies, etc.
These income are wholly exempt from tax
Certain income are excluded from total income subject to
limits, like house rent allowance, leave encashment etc.
In such cases, the exempt portion has to be excluded and
the remaining amount has to be included under the
respective head of income.
Section 10 of the Income-tax Act, 1961 provides for the
exclusions from total income.
There are five heads of income, namely, . Salaries,
. Income from house property,
. Profits and gains of business or profession
. Capital Gains
. Income from other sources
The income of a person should be identified and grouped
under the respective head of income.
Each head of income has a charging section (for example,
section 15 for salaries, section 22 for income from house
property).
Deeming provisions are also contained under certain
49
50
.
4. Compute the income under
each head
.
.
5. Apply clubbing provisions
.
.
.
.
heads, by which specific items are sought to be taxed
under those heads.
For example, if bad debts allowed as deduction in an
earlier year is recovered in a subsequent year, then the
amount recovered would be deemed as business income
of the person in the year of recovery.
The charging section and the deeming provisions would
help you to determine the scope of income chargeable
under a particular head.
Assess the income under each head by . applying the charging and deeming provisions,
. excluding the specific exemptions provided for in
section 10 relating to that head, subject to the limits
specified therein,
. allowing the permissible deductions under that
head, and
. disallowing the non-permissible deductions.
For example, while computing net consideration for
capital gains, brokerage is a permissible deduction from
gross sale consideration but securities transaction tax
paid is not permissible.
An individual in a higher tax bracket may have a tendency
to divert his income to another person who is not subject
to tax or who is in a lower tax bracket.
For example, an individual may make a fixed deposit in
the name of his minor son, so that income from such
deposit would accrue to his son, who does not have any
other income.
In order to prevent evasion of income-tax by such means,
there are specific provisions under the Income-tax Act,
1961 to include the income of one person in the hands of
another person, in certain cases.
For example, income of a minor child (say, interest
income) is includible in the hands of the parent whose
total income is higher before including minor's income.
Such interest income will be included in the hands of the
parent under the head “Income from other sources” after
providing for deduction of up to Rs.1,500 under section
10(32).
However, if a minor child earns income on account of his
or her special skills or talent, like music or dance, then
such income is not includible in the hands of the parent.
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6. Give effect to the provisions
for set-off and carry forward
and set-off of losses
.
.
.
7. Determine the gross total
income (GTI)
.
.
Inter-source set-off of losses
. A person may have income from one source and loss
from another source under the same head of income.
For instance, a person may have profit from
wholesale trade of merchandise and loss from the
business of plying vehicles.
The loss of one business can be set-off against the
profits of another business to arrive at the net
income under the head “Profits and gains of
business or profession”.
. Set-off of loss from one source against income from
another source within the same head of income is
permissible, subject to certain exceptions, like longterm capital loss cannot be set-off against shortterm capital gains though short-term capital loss
can be set-off against long-term capital gains.
Inter-head set-off of losses
. Likewise, set-off of loss from one head (say, loss
from house property) against income from another
head (say, Salaries) is also permissible, subject to
certain exceptions, like business loss cannot be setoff against salary income.
Carry forward and set-off of losses
. Unabsorbed losses of the current year can be carried
forward to the next year for set-off only against the
respective head of income.
. Here again, if there are any restrictions relating to
inter- source set-off, the same will apply, like
long-term capital loss which is carried forward can
be set-off only against long-term capital gains and
not short-term capital gains of a later year.
. The maximum number of years up to which any
particular loss can be carried forward is also
provided under the Act.
For example, business loss can be carried forward
for a maximum of 8 assessment years to be set-off
against business income.
The income computed under each head, after giving
effect to the clubbing provisions and provisions for setoff and carry forward and set-off of losses, have to be
aggregated to arrive at the gross total income.
The process of computing GTI is depicted hereunder Add income computed under each head→Apply clubbing
51
52
provisions → Apply the provisions for set-off and carry
forward of losses
8. Allow deductions
permissible from gross total
income
Certain deductions are allowable from gross total income to
arrive at the total income. These deductions contained in
Chapter VI-A can be classified as –
.
Deduction in respect of certain payments, for example,
Section
80C
80D
80E
taken
.
Deduction in respect of certain income, for example,
Section Nature of Income
80-IAB
80QQB
80RRB
.
Nature of Payment/Deposit
Payment of life insurance premium, tuition
fees of children, deposit in public provident
fund, repayment of housing loan etc.,
Medical insurance premium paid by
an individual/HUF for the specified
persons
Payment of interest on educational loan
for self or relative
Profits and gains of an undertaking
engaged in development of a special
economic zone
Royalty income of authors of certain books
other than text books
Royalty on patents
Other Deductions – Deduction under section 80U in case
of a person with disability
There are limits in respect of deduction under certain
sections. The payment/income are allowable as deduction
subject to such limits. For example, the maximum deduction
under section 80RRB is Rs.3 lakhs.
9. Find out the total income
.
.
10. Calculate the tax liability
.
The gross total income as reduced by the above
deductions under Chapter VI-A is the total income.
Total income = GTI – Deductions under Chapter VI-A
The total income is the taxable income of the assessee.
The rates of tax are specified in the Finance Act.
. For individuals and HUF, there is a basic exemption
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(apply the rates of tax on the
total income)
.
.
11. Reduce tax deducted at
source (TDS) and advance
tax to arrive at the net tax
liability
.
.
.
.
.
.
.
12.
Return of Income
limit and slab rate of tax.
Companies and firms are subject to a flat rate of tax,
without any basic exemption limit.
. The rates of tax have to be applied on the total
income to compute the tax liability.
Rates of tax in respect of certain income are provided
under the Income-tax Act, 1961 itself.
For instance, casual income, like lottery income, is
chargeable to tax at a flat rate of 30% and long-term
capital gains is chargeable to tax at a flat rate of 20%.
These are also to be considered while calculating the tax
liability.
Education cess (EC) @2% of tax liability and Secondary
and higher education cess (SHEC)@1% have to be added
to arrive at the total tax liability.
Total Tax Liability = Tax on total income at applicable rates
+ EC@2%+SHEC@1%
.
.
.
Tax is deductible at source at the time of payment of
salary, rent, interest, fees for professional services,
royalty etc.
The payer has to deduct tax at source at the rates
specified in the respective section, say, tax is
deductible@10% in respect of royalty and fees for
professional services.
Such tax deducted at source has to be reduced by the
payee to determine his net tax liability.
The Income-tax Act, 1961 also requires payment of
advance tax in certain instalments during the previous
year itself on the basis of estimated income, if the tax
payable, after reducing TDS, is Rs.10,000 or more.
Companies are required to pay advance tax in four
instalments, on or before 15th June, 15th September, 15th
December and 15th March of the financial year.
Other assessees are required to pay advance tax in three
instalments, on or before 15th September, 15th December
and 15th March of the financial year.
The advance tax so paid should also be deducted to arrive
at the net tax liability.
Net Tax Liability =Total tax liability-TDS-Advance tax paid
Return of income is the form in which an assessee has to
fill the particulars relating to his total income and tax
liability.
The net tax liability arrived at after deducting TDS and
53
54
.
.
advance tax, has to be paid on or before the due date of
filing of return of income by way of self-assessment tax.
An individual/HUF is required to file a return of income, if
his/its total income, before giving effect to Chapter VIA
deductions, exceed the basic exemption limit.
A firm or company has to file its return of income,
irrespective of whether it earns a profit or incurs loss.
Point 4: Know your syllabus and expected level of knowledge
Having understood the basics of income-tax law, it is important that you are aware of the scope of syllabus and the
level of knowledge expected, so that you can plan your study accordingly.
The syllabus of Part - I: Income-tax of IPCC Paper 4 : Taxation comprises of Important definitions in the Income-tax Act, 1961,
.
Basis of charge, rates of taxes applicable for different types of assessees,
.
Concepts of previous year and assessment year,
.
Residential status and scope of total income,
.
Incomes which do not form part of total income,
.
Heads of income and the provisions governing computation of income under different heads,
.
Income of other persons included in assessee's total income,
.
Aggregation of income, set-off or carry forward and set-off of losses,
.
Deductions from gross total income,
.
Computation of total income and tax liability; rebates and reliefs,
.
Provisions concerning advance tax and tax deduction at source and
.
Provisions for filing return of income.
.
Working knowledge of the above topics is required at the IPCC level.
You are expected to gain knowledge of the provisions of income-tax law related to the topics mentioned above and
also gain ability to solve simple problems concerning assessees with the status of individual covering the areas
mentioned in the above paragraph.
Point 5: Be informed of the Finance Act and Assessment Year relevant for your examination
The Finance Act of a particular year would be applicable for the May and November examinations of the next year.
For instance, the amendments made by the Finance Act, 2011 would be applicable for May, 2012 and November
2012 examinations. The relevant assessment year for May 2012 and November 2012 examinations is, therefore,
A.Y.2012-13.
You are expected to be updated with the notifications, circulars and other legislative amendments made upto 6
months prior to the examination. For May examination, such amendments made upto 31st October of the
previous year would be relevant and for November examination, such amendments made upto 30th April of that
year would be relevant.
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55
Point 6: Draw up a detailed study plan and allocate time for each topic/chapter of the
subject
Preparing a comprehensive study time table well in advance would be of great help in organizing your study in an
effective manner. In fact, you should start your study immediately after passing your CPT examination and
registering for IPCC. Ideally, you should allocate at least 3 to 4 hours every day for the subject of income-tax.
Utilise your study period effectively.
The next step is to estimate the time to be allocated for each topic/chapter of the subject. The scope of syllabus,
the contents of each chapter in the Study Material and Practice Manual would help you to broadly assess the time
which each topic of the subject would consume. Of course, since the subject of income-tax is new to you, you
have to keep some percentage margin over and above the time assessed by you to take care of possible difficulty
in understanding new concepts, particularly relating to business taxation, capital gains and provisions
concerning deduction of tax at source.
Point 7: Make full use of all the knowledge inputs of BOS
The Board of Studies brings out various publications from time to time with a view to assist the students in
education. You are advised to make full use of the Study Material and other educational inputs provided to you.
These educational inputs are also hosted at the BOS Knowledge Portal under the students' section of the
Institute's website www.icai.org. The intention of creation of this portal is primarily to ensure free and
unrestricted flow of knowledge and information to the students across the country by way of easy access to the
latest publications of the Institute. Our efforts will, however, bear fruit only if you make it a habit to browse the
portal as often as possible and assimilate the knowledge inputs contained therein. It is of utmost importance
that you read these knowledge inputs to attain conceptual clarity, to remain updated with the developments in all
the subjects and also to acquire the ability to apply the concepts to solve computational problems. Some of the
important publications of BOS in the area of Income-tax are Publication
Study Material
Objective
The aim of the Study
Material is to build a
strong conceptual base
by explaining the
complex income-tax law
in an easy way.
Key Features
.
.
.
.
.
Supplementary Study
Paper
This is a very important
knowledge input in the
.
The chapters are organised in a logical
sequence for clear comprehension;
The provisions of income-tax law have
been explained in a lucid manner to
facilitate easy understanding;
Illustrations have been given, wherever
possible, to explain the provisions of
income-tax law;
The latest amendments have been given in
italics;
The Circulars/Notifications issued by the
CBDT have been discussed along with the
respective sections to which they relate.
The Supplementary Study Paper is also
divided into chapters, so that you can co-
56
area of taxation
explaining the
amendments made by
the relevant Finance Act
and latest circulars and
notifications issued by
CBDT.
.
.
.
Practice Manual
The Practice Manual has
also been grouped
chapter-wise and
contains a variety of
problems in each topic
for the better
understanding and
application of the
concepts explained in
the Study Material.
.
.
.
.
.
Revision Test Papers
(RTP)
The RTPs are prepared
with the twin objective of
(1) updating you on the
.
relate the same with the Study Material;
Illustrations have been given, wherever
possible, for better understanding of the
amendments;
Related sections are grouped together and
explained to facilitate interlinking and
reading of interconnected provisions;
In respect of each notification, the relevant
provision of the Act which confers the
power to issue such notification is
described briefly, so that you can relate the
notification to the appropriate provisions
of the Act.
The questions in each chapter of the
Practice Manual are taken from the past
ten years question papers set at the PE-II,
PCC and IPCC examinations. In addition,
other questions from past RTPs etc. are
also included;
The questions are adapted as per the
provisions of income-tax law as amended
by the latest relevant Finance Act;
Answers to the questions are based on the
by the latest relevant Finance Act;
For example, in the December 2011
edition of the Practice Manual, the
questions and answers are based on the
by the Finance Act, 2011 and are hence,
relevant for May 2012 and November
2012 examinations. The relevant
assessment year is A.Y.2012-13.
Key points are given at the beginning of
each chapter to facilitate quick revision;
Self-examination questions are added at
the end of each chapter to test your
understanding of the concepts explained
in the corresponding chapter of the Study
Material.
The RTP is divided into two parts –
Part I : Statutory Update – Latest
Notifications & Circulars
Part II : Questions & Answers - A Selfassessment test.
IPCC
Suggested Answers
latest developments
on the statutory
front.
(2) helping you to selfassess the
effectiveness of
your study and
revision by solving
the questions given
in Part II
independently and
comparing the same
with the answers
given.
.
The questions in Part II are framed to test
your awareness and understanding of the
provisions of income-tax law forming part
of the syllabus for IPCC.
As the name depicts, this
publication contains the
questions set at the CA
examination, as well as
the suggested answers
to such questions.
.
The answers are prepared with a view to
assist the students in education;
The Suggested Answers generally
represent the ideal manner in which
questions should be answered;
Therefore, it contains references to
sections (including sub-sections and
clauses), notifications and circulars
issued by the CBDT;
In solutions to computational problems,
the reasons for treatment of items are
explained by way of Notes, giving reference
to the related provisions of income-tax law
.
.
.
57
Point 8 : Follow systematic study pattern
Ideally, for the subject of Income-tax, your study pattern should be in the following sequence as briefed in the
table below Steps in Preparation
Objective of study
Relevant Publication
Step I
Study each topic of your syllabus
thoroughly for conceptual clarity
Study Material (Vol. I) as
amended by the Finance
Act relevant for your
examination.
Step II
After you complete study of a chapter in
the Study Material, update yourself by
going through the amendments by the
Finance Act relevant for your
Supplementary Study
Paper
58
examination and recent Notifications
and Circulars issued by CBDT relating to
that chapter.
Step III
Work out the problems and solve the
questions after completing study of each
chapter in the Study Material to test your
level of understanding of concepts
explained in the said chapter.
Practice Manual (Volume II
of the Study Material)
Note – After you complete study of the
entire syllabus content, solve all the
problems in the Practice Manual once
again to make sure there are no grey
areas.
Step IV
Update yourself with the latest
developments on the statutory front and
self-assess your preparation.
Revision Test Paper (RTP)
Step V
Test your level of preparation by solving
past question papers within the given
time frame of three hours and compare
your answers with the answers published
by the BOS.
Suggested Answers
You can also check your progress by
solving the Mock Test Papers hosted on
the Institute's website. Mock tests are
also held at the various regional offices
and branches of the Institute.
Mock Test Papers
Step I – Study the “Study Material” to get your concepts clear
Be clear with the concepts
Ideally, when you take up any topic for study, you must first go through the relevant chapter of the Study Material
for building a strong conceptual base. Make sure you read the Study Material updated on the basis of the
provisions of income-tax law as amended by the Finance Act relevant for your examination. In case you have the
earlier edition of the Study Material, then, you must go through the Supplementary Study Paper, which explains
the amendments made by the Finance Act relevant for your examination. In addition to the Study Material, you
should preferably go through at least one of the standard text books on this subject . For details regarding the
standard text books, please refer ……...
Try to remember important sections
You should make it a habit to read the tax provisions along with the relevant sections so that you are able to relate
the provisions of law, circulars and notifications with the respective sections. At least, try to remember –
(i)
the charging sections under each head, namely, section 15, 22, 28, 45 and 56;
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59
(ii)
the sections containing exemption provisions, namely, section 10, 54,54B, 54EC, 54F etc.,
(iii)
important deductions under each head, like, sections 16, 24, 32, 36, 37, 57 etc., and
(iv)
deductions from gross total income under section 80C, 80CCC, 80CCF, 80D, 80E, 80G, 80GG ;
You would not be tested on court rulings at the IPCC level.
Jot down key points for easy revision
Make it a habit to jot down the key points including formulae, if any, in each topic, and particularly, in your problem
areas. This would facilitate revision, especially when you have a limited time of just one day before each
examination.
Read the related provisions together
While reading the chapters in the Study Material, you should keep in mind that each chapter cannot be read on a
stand-alone basis. Moreover, for proper appreciation of the income-tax law, inter-linking and combined reading
of sections is an essential pre-requisite. The provisions contained in a chapter, say, Chapter 8 on “Computation of
total income and tax liability”, have to be read along with the provisions relating to heads of income, incomes
which do not form part of total income, clubbing provisions, set-off and carry forward of losses and deductions
from gross total income, which are discussed in separate chapters of the Study Material, to compute the total
income and tax liability of an individual.
We have made an attempt to explain, with the aid of a tabular presentation given in Annexure 1, the manner in
which concepts contained in a particular chapter of the Study Material have to be inter-linked with the related
provisions in another chapter of the Study Material and read together. Please note that the tabular presentation
given in Annexure 1 is only illustrative and not exhaustive. Further, in the said tabular presentation, we have also
made a mention of the provisions which are generally considered as important from the examination point of
view. You can give more stress to these topics when you prepare for the examination. However, you should
definitely not restrict your study only to these topics. One line of advice - Never indulge in selective study and
always cover the entire syllabus.
Step II – Stay current with the “Supplementary”
An analysis of recent question papers has revealed that considerable stress is laid on recent amendments and
developments. You are advised to update yourself with the help of Supplementary Study Paper which is brought
out every year. In this publication, the amendments made in income-tax law by the Finance Act of that year are
categorized chapter-wise and explained with the aid of illustrations and tabular presentations to facilitate easy
understanding. Further, notifications and circulars issued by the CBDT during the last one year (i.e., from 1st May
of the previous year up to 30th April of the next year) are also explained in the Supplementary Study Paper.
Accordingly, the Supplementary Study Paper-2011 explains the amendments made by the Finance Act, 2011 and
significant notifications and circulars issued between 1.5.2010 and 30.4.2011.
You must carefully peruse the amendments explained in the Supplementary Study Paper and update yourself.
The related sections are grouped together and discussed at one place in the Supplementary Study Paper and
therefore, you would not face any difficulty in combined reading and understanding of the interconnected
provisions.
Even if you have the latest Study Material, we would still advise you to go through the Supplementary Study Paper,
60
since the amendments are discussed in detail therein. It would also help you understand and assimilate the
recent amendments in a more effective manner.
Step III – Apply the concepts to solve practical problems in the Practice Manual
After reading each chapter in the Study Material and the corresponding chapter of the Supplementary Study
Paper, try to work out the problems in the parallel chapter of the Practice Manual on your own, and thereafter
compare your answers with the answers given therein. This would help you to identify your mistakes and also
learn from your mistakes. Further, this process would help in revision of the concepts and principles contained in
each chapter of the Study Material and application of the same while solving computation problems. The
computation problems in the Practice Manual are worked out in detail, with working notes/notes, giving
reference to the related provisions of income-tax law.
Once you complete study of all the topics in the syllabus, try solving the problems in the Practice Manual once
again to test if you are clear with all the concepts or whether there are still any grey areas which require further
understanding.
Step IV – Update & Revise with the aid of the RTP
Update yourself on the statutory front
The Study Material is generally updated on the basis of the Finance Act of that year and notifications and circulars
issued up to 30th April of that year. The Study Material, so updated, would be relevant for May and November
examinations held in the following year. However, for the May examination to be held in the following year, the
significant notifications and circulars issued upto 31st October of the previous year are relevant. The RTP for May
examination, therefore, contains the significant notifications and circulars issued between 1st May and 31st
October of the previous year. Likewise, for the November examination of the following year, the significant
notifications and circulars issued upto 30th April of that year are relevant. The RTP for November examination
would, therefore, contain the significant circulars and notifications issued between 1st May of the previous year
and 30th April of the next year.
For instance, the December 2011 edition of the Study Material is updated on the basis of the amendments made
by the Finance Act, 2011 and circulars and notifications issued upto 30th April, 2011. This edition of the Study
Material is relevant for May 2012 and November 2012 examination. However, for May 2012 examination, the
amendments made by circulars and notifications issued between 1st May, 2011 and 31st October, 2011 are also
relevant, and hence, the same have been explained in the RTP for May 2012 examination. Likewise, for
November 2012 examination, the amendments made by circulars and notifications issued between 1st May,
2011 and 30th April, 2012 would be relevant, and the same would be given in the RTP for November 2012
examination.
Revise what you have learnt
Solving the questions and problems in the Revision Test Papers and comparing the same with the answers given
would help you to self-assess the effectiveness of your study and revision.
Step V - Check your level of preparation
Solve past years' question papers and compare with Suggested Answers
You should also make an honest attempt to solve the immediately preceding examination papers within a time
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61
span of three hours and compare your answers with the Suggested Answers published by the Board of Studies.
This will help you to identify the areas where you are deficient and enable you to take corrective steps to avoid such
mistakes in your examination.
However, remember that Suggested Answers are prepared on the basis of the provisions applicable for the
assessment year relevant for that particular examination. For example, the Suggested Answers for November
2011 examination are based on the provisions applicable for A.Y.2011-12. In case you are appearing for the
examination in May 2012 or November 2012, the relevant assessment year would be A.Y.2012-13. Therefore,
while checking your answers with the answers given in the Suggested Answers, you should keep in mind that your
answer should vary only to the extent of amendments made by the Finance Act, 2011 and notifications and
circulars issued after 30.4.2011.
Solve Mock Test Papers
You may also try attempting Mock Test Papers hosted on the Institute's website www.icai.org to complete the
process of revision. You can also appear for the Mock Tests conducted at the regional offices and branches of the
Institute and check your level of progress.
Point 9 : Face the examination with confidence
Having prepared well for the examination, it is also important that you approach the examination with a positive
attitude. Do keep in mind the following points to score well in this paper (i) Answer the questions with due emphasis on provisions of income-tax law - Support your
answers/conclusions with proper reasoning. Answers should be based on relevant legal provisions rather
than a mere common sense and/or guess work.
(ii) Supplement your computation with Working Notes - Give complete working notes while solving
computational problems.
For example, if you are computing taxable HRA while calculating salary income, the working note should
specify the three limits and the corresponding figures, the least of which would be exempt under section
10(13A). The balance HRA would be taxable and taken to the main computation sheet.
(iii) Try to quote relevant section numbers – Quoting section numbers would definitely add value to your answers.
However, it is better not to quote than to misquote a section number/case law.
(iv) State your assumptions/views clearly - Since the provisions of income-tax law are subject to different
interpretations by various courts, there are possibility of alternate views in the tax treatment of a particular
item of income or expense or loss or deduction. The standard text books on the subject also express
divergent views on some provisions. As a student, you should state your view/assumption clearly and
proceed to answer the question on that basis.
(v) Avoid using short forms – Use of short forms like AO, ITO, IT Act, etc. should be avoided. Write the full names
of the statutes, like, “Income-tax Act, 1961”.
(vi) First answer the question which you know best – This will boost your confidence while attempting the
remaining questions and create a positive impression of your level of knowledge.
(vii) Present your answers well - Underline important points and section references as and when you answer each
question. Also, make sure that your handwriting is neat and legible. Answer all parts of a question one after
the other. Do not answer different parts of the same question at different places.
(viii) Follow instructions given on the cover page of answer paper- Pay heed to the instructions given on the cover
page of the answer paper.
62
ANNEXURE 1
Inter-linking of provisions of income-tax law & a glimpse of important provisions
Chapter
Inter-linking/Important provisions
1 - Basic Concepts
Overview of Income-tax
law in India
. Charge of tax
. Rates of tax
. Important definitions,
etc.
The definitions given herein have to be kept in mind while reading
the related concept contained in the relevant chapter of the Study
Material. For example,
. the definition of “income” under section 2(24) needs to be
referred to while determining the taxability of receipts under
various heads of income discussed in Chapter 4.
For instance, any sum received by the assessee from his
employees as contributions to any provident fund or
superannuation fund or Employees State Insurance or any
other fund for the welfare of such employees is includible in the
income of the assessee as per this definition. Thereafter, if such
sum is deposited on or before the due date under the
Employees Provident Fund and Miscellaneous Provisions Act,
1952, the same is allowable as deduction under section
36(1)(va) while computing business income.
. The definition of “assessee” and “assessment” under sections
2(7) and 2(8), respectively, have to be kept in mind while
reading other chapters, especially chapters relating to
procedural and compliance law, namely Chapter 9 on
“Provisions concerning advance tax and tax deducted at
source” and Chapter 10 on “Provisions for filing return of
income”.
Further, the rates of tax have to be kept in mind while computing the
total income and tax liability of an individual under Chapter 8.
2 - Residence & Scope of
Total Income
Since it is the residential status of the assessee which determines
the scope of income chargeable to tax, the concepts contained
herein are very important in computing the total income and tax
liability of an individual under Chapter 8.
.
The provisions involving determination of the residential status and
scope of income chargeable to tax are very important since the
taxability of a specific income of a person depends on his residential
status.
3 - Incomes which do not
form part of total income
. Incomes which are
Many of the exemption provisions contained in this chapter have to
be read along with the relevant head of income, since they affect the
computation of income under that head. For example,
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excluded from total
income, wholly or
partially
Conditions to be fulfilled
to claim such exemption
Provisions relating
to charitable trusts
Conditions to be fulfilled
by charitable trusts to
claim exemption, etc.
the exemption provisions under section 10(10) in respect of
gratuity, section 10(10A) in respect of commuted pension,
section 10(10AA) in respect of leave encashment, section
10(13A) providing for HRA exemption etc. are required to be
applied for computation of salary income (Unit 1 of Chapter 4).
. The exemption provisions under section 10(37) providing for
capital gains exemption on compulsory acquisition of
agricultural land situated within specified urban limits are
relevant for computation of “Capital Gains” (Unit 4 of Chapter
4).
. The provisions of section 10(34) providing for exemption of
dividend distributed by domestic companies in the hands of the
recipient have to be considered while computing “Income from
other sources” (Unit 5 of Chapter 4).
Knowledge of this chapter is, therefore, very important for
computation of income under a particular head under Chapter 4 as
well as for computation of total income of an individual under
Chapter 8.
4 - Heads of Income
Salaries (Unit 1)
Income from House
Property (Unit 2)
. Profits and Gains of
Business or Profession
(Unit 3)
. Capital Gains (Unit 4)
. Income from Other
Sources (Unit 5)
The concepts contained in the chapters relating to heads of incomes
are not only relevant for computation of income under each head,
but are also very important in computing the total income and tax
liability of an individual under Chapter 8.
.
.
.
.
.
The heads of income is the most important chapter, on which,
generally, questions carrying around 30 to 40 marks are set in the
examination.
Salaries
While computing income under the head “Salaries”, exemptions
available under section 10 in respect of house rent allowance,
gratuity, leave encashment, pension, etc. have to be considered.
Therefore, this Unit has to be read along with the relevant provisions
in Chapter 3 on “Incomes which do not form part of total income”.
Knowledge of the definition of salary, deductions from salaries,
provisions relating to taxability of various allowances and
perquisites, valuation of perquisites, taxability of retirement
benefits etc. are all important for solving a problem on computation
of salary income.
Income from house property
The provisions relating to chargeability, determination of annual
value for let out and self-occupied property, admissible deductions,
recovery of unrealized rent, arrears of unrealized rent, treatment of
63
64
income from co-owned property and concept of deemed ownership
are very significant for computation of income from house property.
Profits and gains of business or profession
The provisions relating to deduction of tax at source which are
explained in Chapter 9 are important to determine whether
disallowance under section 40(a)(ia)/(iii) is attracted. Therefore,
the provisions of Unit 3 of Chapter 4 have to be read with the related
provisions in Chapter 9.
Some of the important provisions under “Profits and Gains of
business and profession” are chargeability, depreciation,
expenditure on scientific research, investment linked tax
deduction, other deductions under sections 36 and 37,
inadmissible deductions, deductions on actual payment,
compulsory maintenance of books of account and audit of
accounts, presumptive tax provisions under section 44AD and 44AE
and composite income.
Capital Gains
Capital Gains is again a popular topic in the examinations,
especially provisions relating to chargeability, transfer, cost of
acquisition and improvement, stamp duty valuation, indexation,
cost to previous owner, transactions not regarded as transfer and
exemption provisions.
Income from other sources
As regards “Income from other sources”, the provisions of section
56 are very important, especially the provisions relating to taxability
of any sum of money or property received by an individual/HUF
without consideration or for inadequate consideration contained in
section 56(2)(vii) and the provisions relating to taxability of interest
received on compensation or enhanced compensation contained in
section 56(2)(viii). These provisions, as well as the permissible
deductions contained in section 57, the amounts not deductible as
per section 58, and the provisions of section 115BB relating to
casual income, are important provisions under the head “Income
from other sources”.
5 to 7
Clubbing of income
Set-off and carry forward
of losses
. Deductions from gross
total income
.
.
The provisions relating to clubbing of income and set-off and carry
forward of losses have to be applied while computing income under
any particular head and in computing the gross total income of an
individual.
. Where the income of a person is to be included in the income of
another person by virtue of the clubbing provisions, the income
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will be so included under the respective head to which it relates.
For instance, interest income of a minor child is includible in
the income of the parent under the head “Income from Other
Sources” after providing exemption of up to Rs.1,500 as per
section 10(32).
. Further, the provisions for set-off of current year losses and
brought forward losses are also to be considered to determine
the net income under each head.
The provisions of section 64 relating to clubbing are very important
from the examination point of view. As regards set-off and carry
forward of losses, the following provisions are considered
important
Section
70
71
71B
72 & 80
73
73A
74
74A(3)
Particulars
Inter-source adjustment
Inter-head adjustment
Set-off and carry forward of Loss from house property
Business loss
Speculation business loss
Loss of specified business
Losses under the head “Capital Gains”
Losses from the activity of owning and
maintaining race horses
The deductions from gross total income have to be given effect to in
computation of total income of an individual under
Chapter 8. Thorough knowledge of deductions under sections 80C,
80CCC, 80CCD, 80CCE, 80CCF, 80D, 80DD, 80DDB, 80E, 80G,
80GG,80U etc. is required for solving a problem on computation of
total income of an individual.
8 - Computation of total
income and tax payable
You have to apply the provisions that you have read and understood
in Chapters 1 to 7 and integrate the same in order to compute the
total income and tax liability of an individual.
Please refer to the process of computation of total income and tax
liability given in Point 3.
9 - Provisions concerning
advance tax and tax
deduction at source
The important sections relating to tax deduction at source in this
chapter are Section
192
194A
Relevant TDS provisions
Salaries
Interest other than interest on securities
65
66
194B
194C
194H
194-I
194J
Winnings from lotteries, crossword puzzles etc.
Payment to contractors and sub-contractors
Commission or brokerage
Rent
Fees for professional or technical services
The provisions of these sections are also important to determine
whether disallowance under section 40(a)(ia)/(iii) is attracted for
non-deduction of tax or non-payment of tax deducted.
In addition, the provisions relating to advance-tax, i.e., the
installments of advance tax and due dates etc., are also important.
10 - Provisions for filing of
return of income
This Chapter contains provisions of sections 139, 139A, 139B,
139C, 139D, 140 and 234A, which are all significant The following
provisions are particularly important from the examination point of
view –
Section
139(1)
139(3)
139(4)
139(5)
139A
139B
140
Particulars
Compulsory filing of return of income
Return of loss
Belated Return
Revised Return
Permanent Account Number
Scheme for submission of returns through
Tax Return Preparers
Authorised Signatories to the Return of Income.
PART II: SERVICE TAX AND VAT
The objective of syllabus of Part-II: Service Tax and VAT is to gain knowledge of the provisions of Service tax and
VAT as mentioned in the contents of the syllabus.
Students are expected to have conceptual knowledge of the basic provisions of Service tax and VAT law. Also they
should be able to apply the provisions to solve simple computational problems.
When starting with preparation of Service Tax and VAT portion of Taxation, first of all you need to relax yourself.
Then you should give quick reading to the Study Material without going in deep study. After reading syllabus like a
novel, you should repeat the same procedure. While reading second time , you should mark important sections,
notifications and circulars, make a summary of study side by side. After thorough study, you should reflect your
knowledge, you should try to recall the important sections. This will help you in comprehensive understanding as
well as retention of full syllabus.
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Broadly the whole syllabus of the Part II of the Paper can be divided into following sections:
CHAPTER
NAME
CHAPTER 1
CONCEPTS AND GENERAL PRINCIPLES OF SERVICE TAX-
CHAPTER 2
CHARGE OF SERVICE TAX, TAXABLE SERVICES AND VALUATION
Unit – 1 : Charge of service tax
Unit – 2 : Taxable services
Unit – 3 : Valuation of taxable services
CHAPTER 3
PAYMENT OF SERVICE TAX AND FILING OF RETURNS
Unit-1 : Payment of service tax
Unit – 2 : Filing of returns
CHAPTER 4
VAT-CONCEPTS AND GENERAL PRINCIPLES
CHAPTER 5
INPUT TAX CREDIT AND COMPOSITION SCHEME FOR SMALL
DEALERS
Unit-1 : Input tax credit
Unit-2 : Composition scheme for small dealers
CHAPTER 6
VAT PROCEDURES
First of all, you should pick VAT portion as it will consume less time in completion as well as it is more scoring. Also
scope for amendments in VAT portion is very low so once completed you can be sure of securing at least 20- 25
marks.
While studying VAT, you should start with VAT Concepts and General Principles as well as VAT procedures as it has
been observed in the past examination that average 2 questions are set from each of these chapters. Also,
practical questions on Input Tax Credit carry significant weightage from examination point of view. Hence, it is
advised that you should solve adequate number of practical questions to strengthen this area. After completion
of all this, you should prepare Composition Scheme for small dealers .
For service tax, you should start in same sequence as given in study material as first of all reading basic concepts
and general principles of service tax and then proceeding towards chargeability and valuation will enhance your
understanding. Hence, you should not start with chapters on a random basis but studying chapters in sequence
will lead to appreciation of law.
It may be noted that you will be examined only in respect of the notified taxable services which are 8 at present.
Hence ,it is recommended that you should study thoroughly these services as generally one practical question is
asked from this area. Also, over the years it has been observed that one question each from chargeability and
valuation is asked. Payment of Service Tax and Filing of Returns are the most scoring chapters as generally 3
questions covering 12 marks are set from these chapters.
68
Particularly the ''Revision Test Paper'' and ''Supplementary study Paper'' covering recent amendments in the
Finance Act and details about the latest notifications and circulars would be of immense help to you in attempting
various parts of the paper involving basic concepts and procedural aspects of legislation.
Just before examinations, you need to review full syllabus in a quick manner While preparing for examination, you
should not adopt strategy of selective study but you are required to cover full syllabus.. However , due emphasis
should be given to the following topics of corresponding chapters-
CHAPTER 1 : CONCEPTS AND GENERAL PRINCIPLES OF SERVICE TAX
.
.
Role of a chartered accountant
Extent, commencement and application [Section 64]
CHAPTER 2 : CHARGE OF SERVICE TAX, TAXABLE SERVICES AND VALUATION
Unit – 1 : Charge of service tax
. Exemptions from service tax for all services
CHAPTER 3 : PAYMENT OF SERVICE TAX AND FILING OF RETURNS
Unit-1 : Payment of service tax
. Person liable to pay service tax
. Service tax not payable on free services
. Services performed prior to the date of levy not liable for payment of service tax.
. Due date for payment of service tax
. E-Payment of service tax.
. Adjustment of service tax paid when service is not provided either wholly or partially
. Service Tax Code Number.
Unit – 2 : Filing of returns
. Due dates for filing of service tax returns
. Contents of the return
. E-filing of returns
CHAPTER 4 : VAT-CONCEPTS AND GENERAL PRINCIPLES
.
.
.
.
Variants of VAT
Methods for computation of tax
Merits and demerits of VAT
Role of chartered accountant in VAT
CHAPTER 5 : INPUT TAX CREDIT AND COMPOSITION SCHEME FOR SMALL
DEALERS
Unit-1 : Input tax credit
. Eligible purchases for availing input tax credit
. Purchases not eligible for input tax credit
Unit-2 : Composition scheme for small dealers
. Eligibility for the composition scheme
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.
69
VAT chain under composition scheme
CHAPTER 6 : VAT PROCEDURES
.
Registration
PAPER 5: ADVANCED ACCOUNTING
This paper will acquaint you with the basic concepts, theories and accounting techniques followed by few
different entities and expects you to gain working knowledge of few more professional standards and application
of accounting principles to different practical situations.
Understand the syllabus
To start your preparation for the subject, it is necessary to understand clearly what is to be studied, from where to
be studied and then how to be studied. Let's start with the first step in the process of your preparation. At the
initial stage of preparation, one should study the syllabus carefully; also try to understand the relationships
between various topics and the depth of the study required in different topics. The study material of Paper 5
'Advanced Accounting' is divided into nine chapters/topics based on the syllabus. The topics covered under this
paper can be comprehended in the following manner:
Category
Name of the chapters
Topics on Accounting
Standard
Chapter 1 Conceptual Framework for Preparation and
Presentation of Financial Statements
Chapter 2 Accounting Standards
Partnership form of business
Chapter 3 Advanced issues in Partnership Accounts
Company form of business
Chapter 4 Company Accounts
Industry specific Financial
statements
Chapter 5 Financial Statements of Insurance Companies
Chapter 6 Financial Statements of Banking Companies
Chapter 7 Financial Statements of Electricity Companies
Accounting for Special
Transactions
Chapter 8 Departmental Accounts
Chapter 9 Accounting for Branches including Foreign
Branches
Gather the course-ware to study
Once you acquaint yourself with the syllabus, the next step is to gather the knowledge inputs which have been
provided by the Board of Studies, to study the paper.
70
1. Study Material (Volume I)
2. Practice Manual (Volume II)
Board of studies at the time of registration provides you the above two books.
After announcement of results, the suggested answers of the questions asked in that particular attempt are
issued by the Board of studies.
For every examination, Board of studies comes out with Revision Test Papers (RTP) meant for that particular
attempt. However, in Accounts, you may refer RTPs of past few attempts.
5. Mock Test Papers
Mock Test Papers are also issued by the Board of Studies time to time. These mock test papers are based on the
pattern of the question paper of the past examination.
Now, after knowing the various knowledge inputs provided by the Board of Studies, you should plan your studies
accordingly. As stated earlier that all the course-ware mentioned above is not provided to you at the same time,
hence one can comprehend that the objective of each knowledge input provided is different and requires your
practice of the same, at different stage of your study.
How to study?
There is a very popular saying that if you fail to plan then you plan to fail. Planning is one of the essential elements
for studying a subject of professional course. By planning, here we mean time management for subject as a whole
and individually as well for each and every chapter. We would like to state that for the paper of accounting, one
need atleast three rounds of study.
Advanced Accounting examination paper is purely practical based. Therefore, one has to do written practice of
good number of questions on each topic. So, at the time of planning the study for accounting you should keep into
mind the written practice of practical questions also. Considering the practical nature of the paper, start your
studies from the day you receive the course material. Keeping in mind the quantum of the syllabus, it is suggested
that you should study one to two hours a day. By doing so, you will be able to manage first round of complete study
and two rounds of revision well before time. Your first round of study should be completed well in advance that is
atleast 3 months before your exam. However, your planning should be based on the availability of time and the
contents of the subject.
These three rounds of study will help in boosting the confidence level for the subject and will make you mentally
First round of study
Similar to the paper of Accounting, the syllabus of 'Advanced Accounting' also covers Accounting Standards as
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71
well as other topics, so here also, your planning should be divided in two parts namely1. Accounting Standards
Every day when you start your study first go through the concepts which you have read last day then start learning
new concepts. Remember, out of sight, out of mind. Ideally your first study should be within 24 hours of initial
reading, the second within 1 week of reading.
In Paper 1 'Accounting' at IPCC Group I level, we already had chapters on Partnership firm and Company
accounts which dealt with some of the aspects of such form of businesses. Like in partnership, aspects of
admission, retirement or death of a partner have been dealt with and the topics of companies accounts dealt with
the issue of bonus shares, amalgamation, internal reconstruction etc. The paper of 'Advanced Accounting'
covers some more aspects of partnership firm and company accounts. Therefore, we in this paper recommend
you to take these topics first as you are familiar with the accounting treatment followed in such types of
businesses and will be in a position to grasp quickly the accounting treatment to be done for other aspects
covered in this paper. However, consideration the importance of these topics, unit on amalgamation and internal
reconstruction have been included in this paper also.
For other topics, you may decide at your convenience as to which topic should be taken up next and in what
sequence. However, for this paper, we suggest you to study accounting standards at the end as we do not have any
chapter which is specifically based on the provisions of accounting standards though accounting standards may
apply in some situations like for valuation of investments of banks you may have to apply the provisions of AS 13 if
nothing is specified in the Banking Regulations or the RBI Act in this regard.
Again in this paper also, we would like to re-iterate that for accounting standards, study the explanation given in
chapter 2 first and then study the bare text of the accounting standard given as an appendix at the end, after
chapter 9 of the study material. Following this procedure will help you in indepth understanding of the underlying
concepts of accounting standards specified in the syllabus and the manner in which it is interpreted and should
be interpreted.
Please refer pages 23 to27 for
1. Use of BoS Knowledge inputs in a systematic pattern
2. Important points to be kept in mind
3. Tips for examination.
PAPER 6: AUDITING AND ASSURANCE
Auditing is the heart of Chartered Accountancy Course as much as it is at the head of the profession of
Accounting. The intent of this paper is to understand objective and concept of auditing and gain working
knowledge of generally accepted auditing procedures and of techniques and skills needed to apply them in audit
and attestation engagements. While studying this paper, students are advised to integrate the knowledge
acquired in other subjects, specifically, accounting, corporate laws and taxation in a meaningful manner. Such
72
learning would only help a student to become a better professional. In nutshell, Auditing and Assurance, is a
subject which involves application of theoretical knowledge of other subjects.
For the simplicity of the students it is suggested that the entire syllabus may be segregated into the following six
parts which may be studied with the help of Chapters viz.
S. No.
Topics to be covered in each part
Reference of Chapters
Part 1
Auditing Concepts, Auditing engagement,
Documentation, Audit evidence
Refer Chapter 1 & 2
Part 2
Standards on Auditing and Guidance Notes
Prescribed by ICAI in the form
of list of publication Given in
Volume II of Study Material as
annexure part.
Part 3
Internal Contr ol, Internal Contr ol and
Computerized Environment, Approaches to
Auditing in Computerized Environment., Auditing
Sampling, Analytical review procedures.
Refer Chapter 3
Part 4
Audit of payments, Audit of receipts, Audit of
Purchases, Audit of Sales, Audit of suppliers'
ledger and the debtors' ledger, Audit of
impersonal ledger, Audit of assets and liabilities.
Refer Chapter 5 & 6
Part 5
Company Audit, Audit Report
Refer Chapter 7 & 8
Part 6
Special points in audit of different types of
undertakings, i.e., Educational institutions,
Hotels, Clubs, Hospitals, Hire-purchase and
leasing companies (excluding banks, electricity
companies, cooperative societies, and insurance
companies).,Features and basic principles of
government audit, Local bodies and not-forprofit organizations, Comptroller and Auditor
General and its constitutional role.
Refer Chapter 9
For the better understanding of the Standards on Auditing (SAs) given in Part 2 it may be noted that they contain
two distinct sections, one, the Requirements section and, two, the Application Guidance section.
The fundamental principles of the Standard are contained in the Requirements section and represented by use of
“shall”. The application and other explanatory material contained in a Standard on Auditing (SA) is an integral
part of the SA as it provides further explanation of, and guidance for carrying out, the requirements of an SA, along
with the background information on the matters addressed in the SA. It may include examples of procedures,
some of which the auditor may judge to be appropriate in the circumstances. Such guidance is, however, not
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73
intended to impose a requirement. Further, the standard portion or principles enunciated in a Standard need not
to be given in bold face.
For the remaining part of syllabus our study is divided in nine chapters viz. Nature of Auditing, Basic Concepts in
Auditing, Preparation for an Audit, Internal Control, Vouching, Verification of Assets and Liabilities, The Company
Audit – I, The Company Audit – II and Special Audits
Chapters from 1 to 4 are the backbone of the syllabus of Auditing and Assurance. These four chapters are
basically based on Standards on Auditing. After preparing these chapters, students will be able to understand
the other chapters like Vouching, Verification of Assets and Liabilities and Special Audit.
The Chapter 1 - Nature of Auditing deals with the Concept and objective of Auditing, aspects to be covered in
Audit, Basic Principles Governing an Audit, Scope and Inherent Limitations of Audit, and Relationship of Auditing
with other Disciplines. In this chapter, student will be able to understand the functional classification, qualities of
an auditor, objectives of audit, basic principles of an audit, and different types of audit and relationship of
auditing with other disciplines. The student should try to carefully understand the basic concepts and the
structure of the auditing to gain the in depth knowledge of the subject. As already discussed these chapters are
interlinked with Standards on Auditing. Therefore, to better understand the implication of this chapter, it is
suggested to read it with SA 200, “Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with Standards on Auditing and SA 240, “The Auditor's responsibilities relating to Fraud in an Audit
of Financial Statements”. Instead of cramming the contents, the student should try to bring out the very idea of
the chapter. This exercise will enable him to bridge the linkage for the further study.
After understanding the nature of auditing, student should try to link it with the basic concepts in auditing i.e.
Chapter 2 which deals with Concept of Auditor's Independence, Audit Evidence, Concept of Materiality, Concept
of True and Fair and Disclosure of Accounting Policies. Student should refer SA 500 on Audit Evidence, SA 320 on
Materiality in Planning and Performing an Audit, SA 520 on Analytical Procedures and SA 505 on External
Confirmations etc. alongwith this chapter. The fair understanding of the chapter has its roots in the above
mentioned SAs. Hence, it is suggested that the students should understand the SAs comprehensively.
The Chapter 3 requires the students to identify the major areas for preparation for an audit for which they should
refer SA 300 on Planning an Audit of Financial Statements, SA 220 on Quality Control for Audit of Financial
Statements, SA 230 on Audit Documentation etc. After going through the text of these SAs the students can
apprehend the chapter which deals with Auditor's Engagement, Audit Process, Techniques, Procedure, Planning,
Programme, Risk, Continuous and Final Audit, Planning and Materiality, Audit Working Papers and Obtaining
Certificate from Management.
Chapter 4 is on Internal Control which deals with Concept, Environment, Inherent limitations, Accounting and
Financial Control, Internal Control - Management and the Auditor, Relationship between the Assessments of
Inherent and Control Risks, Internal Control and the Computerized Information System (CIS) Environment,
Internal Check, Internal Audit. To comprehend this chapter the students should try to establish linkage with the
SA namely 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity
and its Environment, SA 330 on The Auditor's Responses to Assessed Risks, SA 610 Using the Work of Internal
Auditors etc. While answering to the questions of this chapter, students should be analytical and objective,
without losing focus on the statement.
74
Vouching and verification are very important chapters. While studying these chapters, students should have
knowledge of basics of an audit. Students should not stuff the steps for vouching and verification. Instead they
should apply their knowledge.
Vouching is discussed in Chapter 5 which deals with Audit of cash transactions, Audit of Trading Transactions,
Audit of Ledgers, Balance Sheet Audit and Analytical Procedures. The general approach to study the chapter is to
examine the existing internal control system in the organisation. The appropriate ledger accounts involved, if any
should also be scrutinized. Further the vouching ends with the routine checking of the receipts and payments
involved and preparation of bank reconciliation statement.
Similarly the Verification of Assets and Liabilities is discussed in the Chapter 6. The main aspects covered here
includes Capital and Revenue Expenditure, Depreciation, Reserves, Verification of assets, Current Assets, Bookdebts, Bank Balances, Cash in hand, Miscellaneous Expenditure, Verification of Liabilities, Contingent
Liabilities, Events occurring after the Balance Sheet Date, Prior Period and Extraordinary Items and Changes in
Accounting Policies. The basic features to study involve existence, ownership, control, rights, valuation,
disclosure and presentation of the items involved. Further, student may interlink this chapter with Guidance
notes, Standards on Auditing and Accounting Standards.
The Chapter 7 - The Company Audit-I deals with Qualifications and Disqualifications, Appointment,
Remuneration, Removal, Powers, Duties of auditor, Ceiling on number of audits, Audit Report, Audit of Branch
Office Accounts, Joint Audit, Special Audit, Cost Audit, Statutory Report. For gaining the in depth knowledge of
the subject the student should focus on the various provisions of the Companies Act,1956 and the reporting
mechanism as suggested by SAs in 700 series, CARO,2003 and Statement on Reporting Under Section 227 (1A)
Of The Companies Act, 1956.
The Chapter 8 - The Company Audit-II deals with General Considerations in a Company Audit, Specific Provisions
as regards Accounts in the Companies Act, 1956, Payment of Interest out of Capital during Construction, Special
requirements of Company Audit, Audit of Share Capital, Option on Share Capital, Shares Transfer Audit,
Verification of Issue of Bonus Shares, Audit of Debentures, Audit of Dividends, Presentation of Financial
Statements. Again as contemplated by the chapter 7 the requirements for understanding this chapter is same.
Since the chapter deals directly with the provisions of the Companies Act, 1956 the students should be very clear
and concise in their applicational attribute. They should avoid going round and round by harping on one or two
points repetitively in different ways. Instead they should reach the heart of the question and explain the major
features or matters in a logical point-wise manner with sub-headings for each point and try to give a few examples
in support of your reasoning.
The Chapter 9 Special Audits deals with Government Audit, Audit of Local Bodies, Audit of Non-Governmental
Organizations (NGO's), Miscellaneous Audits. Students are expected to study the procedure involved in various
audit and try to establish the linkage with the knowledge gained from other disciplines like accounting for audit of
partnership firms in learning the audit procedure. Further the students can relate their basic understanding while
going through the other audits like audit of schools, hotels, cinemas etc. The important points in any audit include
constitution, minute's book, internal control, vouching of receipts and payments, verification of assets and
liabilities etc. The students should try to encapsulate the procedures in various audits to command good holding
of marks.
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75
In general, students should in the first instance focus on studying Auditing concepts, procedures and techniques
from the study material. The knowledge gained from meticulous study should be translated in the form of succinct
notes. These notes may be accompanied by the relevant proforma and diagrams so that at the later stages of
preparation, the conceptual knowledge underlying different topics may be gained within minimum time and
minimum efforts without going through a number of books again.
Students should also take a keen interest in updating themselves on contemporary developments in the field of
auditing by regularly referring to articles on Auditing in CA Journal, Students' monthly Journal and other relevant
professional journals, publications and books.
Students may also scan through the Annual Financial Statements of Companies to analyse the notes and
qualifications, if any, incorporated by the Auditors in their Audit Report.
PAPER 7: INFORMATION TECHNOLOGY AND STRATEGIC MANAGEMENT
PART I: INFORMATION TECHNOLOGY
Information Technologyhas become an integral part of our daily life. There is hardly any field left where the usage
of Information Technology has not revolutionized the traditional ways of workings. The emergence of IT is the
biggest story of our time. It is changing the ways, we live and work. Concepts relating to computers and IT have to
be understood with a logical bent of mind, strongly backed by a practical thinking particularly on the application
aspects.Keeping in mind the above facts, The Institute has introduced 100 hours Information Technology Training
to provide the practical knowledge for all the aspiring CA students. It is essential for the students to devote some
time for independently solving practical problems for application software. Such a practice will enhance their
confidence in attempting the related questions during examination.It will greatly help them in becoming
computer literate; to familiarize themselves with nitty-gritties of the technology and to gain the much needed
hands-on-experience on various application programs such as MS-Office, Outlook Express as well as various
accounting and audit techniques required by a chartered accountants in their day to day workings.
It was also realized that along with practical training, theoretical concepts relevant for CAs are also needed to be
discussed in more detail. Accordingly the paper on Information Technology form part of the course curriculum of
the Chartered Accountancy courseat IPCC level. As theory and practical are complementary to each other for any
subject, the case is same here.By having practical knowledge through 100 hours ITT and the comprehensive
theoretical knowledge through IT paper, IT skills of CA students will be more strengthened which will in turn
provide discharging of their professional responsibilities in a more effective as well as efficient manner.
The syllabus is divided into six (6) chapters.The chapter-wise major topics/sub-topics are given in the tabular
form along with the number of minimum hours a student should studyfor preparation of their examination.
76
Chapter No.
1
2
3
Chapter Name
Major Topics/Sub-topics
No. of hours
40
Unit-I :
Introduction to
Computers
.
.
.
.
.
.
.
.
Historical Development of Computers
The Computer Generations
Classification of Computers
Advantages and Limitations of Computers
Basic Computer Architecture
Motherboards
Storage Devices
Secondary Storage Devices
Unit-II : Input
and Output
Devices
.
.
.
On-Line Entry
Direct Data Entry
Types of Computer Output
Unit-III :
Software
.
.
.
System Software
General Purpose Software/Utilities
Application Software
Data Storage,
Retrieval and
DBMS
.
.
.
.
.
.
.
.
.
.
.
.
.
.
20
.
.
.
.
Decimal Number System
Binary Number System
Computer Data Code
Bits, Bytes and Words
Concepts related to Data (Data Types)
What is Data Processing ?
Data Base Management Systems
Database Structure
Other Database Models
Database Components
Structure of DBMS
Database Administrator
Types of Databases
Structured Query Language and
Other Query Language
Documentation and Program Library
Backup, and Recovery
Data Warehouse
Data Mining
.
.
.
.
.
Introduction
Computer Networks
Classifications of Networks
Components of a Network
Network Topologies
30
Computer
Networks &
Network Security
IPCC
.
.
.
.
.
.
.
.
.
.
Transmission Technologies
Transmission Protocols
Local Area Networks
Client / Server Technology
Virtual Private Network (VPN)
Broad Band Networks (ISDN)
Types of Servers
Different Tier Architectures
What is A Data Centre?
Network Security
4
Internet and
Other
Technologies
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.
Introduction
Internet Components
Intranet
Extranet
Internet Protocol Suite
Electronic Commerce
Types of E-Commerce
Customer Relationship Management (CRM)
Supply Chain Management (SCM)
Electronic Data Interchange (EDI)
Electronic Fund Transfer (EFT)
Types of Electronic Payments
Risks and Security Considerations
Mobile Commerce
Bluetooth
Wi- Fi- Wireless Fidelity
30
5
Introduction to
Flowcharting
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.
Programming Process
Program Analysis
Flowcharts
Program Flowcharts
Examples of Program Flowcharting
-Miscellaneous Solved Examples
Dry Run and Debugging the Program
20
Types of Decision Table
Steps in Preparing a Limited Entry Decision
Table
-Solved Examples
Flowchart for a Decision Table
Advantages and Disadvantages of Decision
Tables
Miscellaneous Exercises
10
.
6
Decision Table
.
.
.
.
.
77
78
Chapter-wise/Topic-wise Specific Guidance
Chapter - 1
The first unit 'Introduction to Computers' of this chapter describes the basic concepts relating to the hardware
and the software of computer systems. In this, student should clearly understand history, various generations,
types and the need of the computer systems in day to day workings. Further, the architecture of computer
systems, its components, functionality and usage etc. are required to be learnt by them. After understanding the
basic concepts, they should now concentrate on various components/devices used in storing and processing the
data in computer system. The student should thoroughly study various types of storage devices, their
characteristics and storage capacity etc.
The second unit ' Input & Output Devices' of this chapter explains various types of Input and Output devices and
their uses in real life work environment. The student needs to understand the context of using these devices for
input/output of data to/from computer system. Besides these, Input & Output methods like DDE which are
useful for banking, retail, insurance, education etc. sectors are required to be learnt by them. They are also
expected to go through with the latest data output technologies like Multifunctional Printers(MFP), COM,
Speaker, Plotters etc. useful in various sectors.
The third unit 'Software' of this chapter explains types of software broadly System, Application and Utility and
their uses in controlling the system operation and development/deployment of application in business
environment. The student should learn the importance of these softwares required to be installed in the computer
system for performing the operation as per the user's requirement.Various types of software, their functions and
features must be clearly understood by them. They are also required to understand that without system software,
the application software will not function. So, it is must to have system software in the form of Operating System
and other utilities for running user applications in computer system. Basic concepts on DSS,ERP, Expert System
etc. is alsoexplained for advance learning and needs to be learnt by them.
Chapter - 2
The chapter 'Data storage, Retrieval and DBMS' describes the importance of data and information that can be
stored in the database and processed later on whenever user wants it. The student should understand various file
organization methods to store and retrieve the data and their advantage and disadvantages before going into the
details about the DBMS. The short-coming of using file system and the need of implementing DBMS in the
organization must be understood by them. Students should learn various DBMS software and common features
such as controlled data redundancy, inconsistency and enhanced data Integrity in the database. Further, various
concepts relating to DBMS such as database structures, their types, various keys used, database components
etc are required to be learnt thoroughly by them. They should also understand the relationship between the
database records, various architecture, their types, models, components and how the data can be accessed and
processed using SQL. The importance of Database Administrator and their roles in the organization must be
clearly understood by them. One of the main aspectsi.e. software documentation and its requirements to prepare
these documents for future reference are well discussed in the study material and are expected from the student
to study for preparation of their examination. They should also understand the importance of the database
backup and recovery issues, which is very useful in case of system failure. Advance concepts relating to analysis
of data and extracting information from the database using certain rules are to be learnt by them.
IPCC
79
Chapter - 3
The chapter 'Computer Network & Network Security' explains the importance and uses of data sharing through
various Information & Communication technologies and methods, which has been discussed in the study
material. First, the student should learn the scope and the benefits of using computer network in business
environment before proceeding to further advance topics in this chapter.The basic concepts of computer
networks, their classification, various devices used, their architecture and protocols are required to be
understood by them. They should learn how the data can be transmitted from one system to another in limited
geographical area in a network environment using network components like communication interface devices,
channels and softwares.The geometrical arrangement of computer resources, remote devices and
communication facilities with their uses are required to be understood by them. Students are expected to go
through the various concepts relating to LAN and Client-server architecture to enable them to work in this
environment. Further, the advance topics such as Data Centre which is a centralize repository for the storage,
management and dissemination of data & information with high security needs to be understood by the students.
Sharing secured information is one of the important aspects that need to be considered while working in network
environment. Student should understand the need, levels and techniques of network security as well as various
threats and vulnerability procedures for information security.
Chapter - 4
The chapter 'Internet and other technologies' describe the important aspects of Internet and its associated
technologies in detail. The student should learn basic terminology related to Internet like WWW, web page, HTTP,
URL etc. and are useful in understanding the concepts well. The various application areas and business uses of
Internet must be understood by them. It is important to know what type of Internet connection used in different
business environment for information and data sharing. They are expected to know all these concepts at this level
of CA curricula. Internet provides a means of sharing information through email, bulletin boards and information
retrieval services, Intranet and Extranet are advances to Internet which facilitates communication within and
outside the organization. Both the technologies need to be understood by the student also the differences
between them should be clear to them. Besides these, they should focus on activities facilitated by Internet such
as e-Commerce and its types, CRM, SCM, EDI, EFT and e-Commerce security which are briefly discussed in this
chapter. Use of various Internet/ networking concepts such as Wi-Fi and Bluetooth technology for faster access of
information in networked environment should be grasped.
Chapter - 5
The chapter 'Introduction to Flowcharting' explains the programming process in graphical format that can solve
the given problem using a computer system. Student should learn the process and importance of programming in
computer. They should understand the problem first, than accordingly develop an algorithm which is a specific
procedure that defines a finite list of instructions specifying a sequence of operations and gives the answer to the
specific problem. After algorithm, they should also try to learn various symbols used in forming the flowchart.
Chapter - 6
After going through with the programming process and flowchart basics, this chapter describes how a complex
programming problems can be solved using decision table. Student should understand the possible
contingencies that may be considered within the program and the appropriate course of actions for each
contingency. They should also understand the benefits of using decision table over flowchart.
80
PART II: STRATEGIC MANAGEMENT
Introduction
Organisations function in a highly dynamic business environment. They continually evolve their plans and
strategies to grow or survive. Chartered Accountants with their holistic knowledge, skills and financial acumen
possess strong capabilities to assist organisations in shaping-up the future of the organisations. Knowledge of
the concept of strategic management will help them to have a sense of long term direction and minimize the effect
of adverse conditions and changes in business environment.
The concepts of strategic management will help students of Chartered Accountancy to learn the critical issues
and concerns facing the organisations. Assimilation of the concepts of strategic management will also help them
to learn, how organizations can respond to the vagaries of environment. Sound grasp of the subject will also help
them in accelerating their career growth. Knowledge of the subject is very important at higher levels.
Chapter No.
1.
Reference of the syllabus/
Name of the Chapter
Business Environment
Topics
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.
.
.
.
.
.
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.
.
.
2.
Business Policy and Strategic
Management
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.
.
.
Introduction
Business
Objectives of a Business
Environmental Influences on Business
Why Environmental Analysis?
Characteristics of Business Environment
Components of Business Environment
Relationship between Organization and
its Environment
The Micro and Macro Environment
Elements of Micro Environment
Elements of Macro Environment
PESTLE Analysis
Strategic Responses to the Environment
Competitive Environment
Porter's Five Forces Model – Competitive
Analysis
Introduction
Business Policy as a Discipline
Meaning and Nature of Management
What is a Strategy
Corporate Strategy
The Dynamics of Competitive Strategy
Strategic Management
Strategic Decision Making
IPCC
3.
Strategic Analysis
.
.
.
Strategic Management Model
Vision, Mission and Objectives
Strategic Levels in Organisations
.
.
.
.
Introduction
Strategic Analysis
Situational Analysis
The Methods of Industry and Competitive
Analysis
SWOT Analysis
TOWS Matrix
Portfolio Analysis
.
.
.
4.
Strategic Planning
.
Introduction
Planning
The Stages of Corporate Strategy
Formulation-Implementation Process
Strategic Alternatives
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.
5.
Formulation of Functional
Strategy
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.
.
.
Introduction
Marketing Strategy Formulation
Financial Strategy Formulation
Production Strategy Formulation
Logistics Strategy
Research and Development
Human Resource Strategy Formulation
6.
Strategy Implementation and
Control
.
.
Introduction
Interrelationships between Strategy
Formulation and Implementation
Issues in Strategy Implementation
Organization and Strategy
Implementation
Strategic Business Units & Core
Competence
Leadership and Strategic Implementation
Strategic Change
Strategic Control
Building a Strategy-Supportive Corporate
Culture
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.
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.
7.
Reaching Strategic Edge
.
.
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.
.
Introduction
Business Process Reengineering
Benchmarking
Total Quality Management (TQM)
Six Sigma and Management
Contemporary Strategic Issues
81
82
Chapter Related Tips
The study material in the subject is comprehensive enough to be relied on by students to acquire reasonable
working knowledge to perform well in the examination. The only requirement is that students have to develop
keen interest in the subject right from the beginning of their CA studies.
It has been noticed that often students tend to feel that this subject can be easily crammed in a couple of days. A
superficial preparation of a few selected topics for a few days or weeks before the examination is likely to lend the
students into serious trouble during the examination time. Students have to set aside adequate time to cover all
portions of the study material. They have to understand the subject comprehensively. It is very important that
students must understand the relevance of each concept in practical scenario. For this purpose, they must read
business magazines/Journals, Financial Newspapers, etc.
Students will find innumerous examples of strategic relevance around them. These examples may relate to
introduction of new products, mergers, diversifications, sell off and so on. Student can make a habit to discuss
such strategic actions of business with other students to analyse and understand the circumstances under which
such decisions are taken and the benefits and the risks emerging out of it.
Chapter wise tips are given below:
1. First chapter of strategic management is about the Business Environment. In this chapter study material
covers meaning and objectives of a business, environmental effect on business, environmental analysis, and
characteristics of business environment. For this, students should read the economy related news and
articles in business magazines/Newspapers to understand real life business environmental factors which
directly or indirectly help in or impair the organizational functioning. After understanding the concept of
business environment, students should thoroughly study the elements of micro business environment and
macro business environment which are extensively defined in this chapter. To gain a deeper understanding of
competitive environment of a business organisation, Michael Porter's five forces model has been included
in the chapter.
2. Second chapter depicts the path of strategic management. Student should carefully understand the
meaning and nature of corporate strategy. After understanding the concept of strategic management
student should go through the framework and importance of strategic management. Further, strategic
decision making, strategic management model is also introduced. Later student should learn the strategic
vision, mission, objectives and goals along with the levels of strategic management. You can browse
websites of some of the major companies and study their vision and mission.
3. Third chapter is completely dedicated to strategic analysis. Student should understand situational analysis,
SWOT analysis, TOWS matrix along with methods of industry and competitive analysis. For practical
knowledge, students can conduct SWOT analysis of one or two leading organisations. Portfolio analysis is
also introduced in this chapter such as BCG matrix, Ansoff's matrix, ADL matrix, GE model.
4. Strategic planning is defined in this chapter. After understanding the concept of strategic planning, student
should go through corporate strategy formulation and implementation process with its five stages. Further,
student should learn the strategic alternatives given by Glueck and Jauch and Michael Porter's generic
strategies. This chapter also elucidates different strategies including diversification, divestment,
IPCC
83
retrenchment and turnaround. These strategic alternatives can be clearly understood by reading the articles
published in various business magazines, Newspapers. In the last few years, Indian companies have done
some major global acquisitions.
5. This chapter explains various functional strategies, viz; marketing, production, logistics, research &
development, finance and human resources. Student should also focus on the areas covered by each
functional strategy.
6. Strategic management process does not end with the decision. In the sixth chapter, the issues and
interrelationships between strategy formulation and implementation are discussed. The chapter considers
organization structure for strategy implementation and covers functional structure, divisional structure,
strategic business units (SBUs), matrix structure and network structure. Later, strategic leadership is
discussed. The chapter reveals the leadership role in strategic implementation and also explains the two
basic approaches of leadership styles, viz., transformational leadership and transactional leadership style.
It also introduces the steps to initiate strategic change along with Kurt Lewin change process. Control
function of strategic management is also introduced.
7. In the last chapter, student should learn some of the recent and evolving concepts in strategic management
such as BPR, benchmarking, TQM and six sigma. Some of the contemporary strategic issues are also
introduced in this chapter.
Examination related hints:
A few more hints with regard to the approach for attempting the various types of examination questions in the
subject are offered as under:
(a) Comment type questions: Here you have to briefly explain the statement in your own words-what it is about.
Then examine the extent to which and the conditions under which the statement is valid. Outline the
limitations of the statement. Your answer has to be analytical and objective, without losing focus on the
statement.
(b) Short Notes: Your answer should be precise, brief, and to the point. Not much explanation is required in
answering short-note questions. You have to write the essential aspects in a nutshell. You can score well in
short notes by making a neat and concise presentation of the relevant subject matter.
(c) Essay type Questions: Give a brief introduction by way of defining the relevant concepts.
Reach the heart of the question and explain the major features or matters in a logical point-wise manner with
sub-headings for each point. Give a few examples in support of your reasoning.
Never deviate from the main thrust of the question. Cover as many points as are reasonably necessary to do
justice to the question.
Avoid going round and round by harping on one or two points repetitively in different ways.
Professional
Competence Course (PCC)
PCC is composed of two levels viz., Group-I and Group-II.
It comprises of Six Papers of 100 Marks each.
Level of Knowledge: Working
Group-I
Paper 1: Advanced Accounting*
Paper 2 : Auditing and Assurance
Paper 3: Law, Ethics and Communication
Group-II
Paper 4 : Cost Accounting and Financial Management
Paper 5 : Taxation*
Paper 6 : Information Technology and Strategic Management
* Since syllabi of these papers are different at IPCC and PCC levels, subject specific guidance is
given separately for them in this portion. For other subjects, students may please refer to the
guidance given in IPCC portion.
Subject-specific Guidance
GROUP-I PAPER 1: ADVANCED ACCOUNTING
Accounting is one of the core subjects in the Chartered Accountancy Course. The paper concentrates on
conceptual understanding of the crucial aspects of accounting. The objective of the Accounting paper at PCC
level is to gain working knowledge of the principles and procedures of accounting and their application to
different practical situations.
The book is divided into 12 chapters, each addressing to a special aspect of accounting. Chapter 1 is based on
conceptual framework for preparation and presentation of financial statements while Chapter 2 deals with
Accounting Standards. Chapters 3 to 6 cover company accounts including preparation of financial statements of
banking, insurance and electricity companies. Chapter 7 lays emphasis on average due date, account current
and self balancing ledgers whereas Chapter 8 deals with preparation of financial statements of not-for-profit
organizations. Chapter 9 and 10 are devoted to accounting from incomplete records and accounting for special
transactions i.e. hire purchase and instalment sale, investment accounts, departmental and branch accounts
and insurance claims for loss of stock and loss of profit. Chapter 11 discusses accounting of partnership firms
and Chapter 12 explains basic concepts of accounting in computerized environment.
Your professional approach and qualitative effort is the key to pass CA Professional examinations without much
strain or stress. You need to plan right from the beginning by devoting your time and effort in meticulously
scanning the exact needs of this highly reputed professional course.
In accounting examination, it is a test of your intelligence, ability or knowledge in the subject. So, it is very
important to make a good planning to prepare for accounting examinations. To begin with, you should study the
syllabus carefully and try to understand the relationships between various topics and the depth of the study
required in the different topics. Study materials including, revisionary test papers, suggested answers of past
86
examinations would help you to increase your study base. Monthly Students' Journal “The Chartered Accountant
Student” and “The Chartered Accountant Journal” should also be referred regularly to keep yourself abreast with
the latest amendments in the topics covered by the syllabus.
Ensure that you have understood the concepts and logic of each and every topic thoroughly. Keep questioning
yourself until you are absolutely clear on the topic. The conceptual knowledge underlying different topics gained
from thorough study should be translated in the form of comprehensive but concise notes which may be digested,
at the revision stage, within minimum time and minimum efforts without going through the whole book again.
These notes may also be accompanied by the proforma of relevant accounts.
Undertake mock tests -Try doing practical problems in examination conditions. Try practical problems without
seeing solutions and then compare answers to evaluate your performance and take steps to remove
shortcomings.
Some essential and desirable attributes of good examination preparation and performance are outlined as
follows:
(a) Finger-tip knowledge of fundamentals of Accounting is a must. You are expected to be thorough with the
basics of accounting and their application to various practical situations.
(b) In-depth conceptual understanding of all the topics of the subject: Generally accepted accounting
principles, accounting formulas, relevant statutory provisions for preparation of accounts (Companies Act
1956, SEBI Guidelines, Banking Regulation Act 1949, Electricity Act 2003, IRDA Regulations 2002) form
part of the conceptual background, apart from specific concepts integral to various accounting topics.
(c) Thorough knowledge of Accounting Standards prescribed in the syllabus: These have a direct bearing on
preparation and presentation of financial statements of companies. You should be familiar with the
interpretation and application of the requirements of the accounting standards.
(d) Use of proper and prescribed formats for presentation of accounts: You should make it a practice to adopt
the formal formats and present accounts in a neat manner, together with workings notes.
(e) Preparation of concise notes for revision: Besides preparation of important points of the topic (which will
help you to recapitulate the whole concepts), a summary of tricky points and adjustments gathered from the
practice of various good illustrations may also be prepared which will help in grasping the intricate practical
aspects of accounting topics.
(f) Solving illustrations and problems in accounting on a regular basis under simulated examination conditions:
You are required to develop analytical reasoning, accuracy, speed and efficiency in presentation of the
solutions to practical problems in examinations by solving the illustrations under virtual examination
conditions. This can be done by undertaking mock test.
(g) Adequate revision of the topics: Also remember – out of sight, out of mind! Keep revising what you have read.
Ideally, the first revision should be within 24 hours of initial reading, the second within 1 week of initial
reading, third within 1 month of reading.
PCC
87
GROUP-II PAPER 5: TAXATION
Taxation Laws constitute a very significant area of core competence for Chartered Accountants. It is vital that you
acquire a thorough grasp of both income-tax and service tax.
Guidelines to students of PCC Course
The level of knowledge required for the paper on Taxation is “working knowledge”. The objective of Part I: Incometax of the paper is to gain knowledge of the provisions of income-tax laws relating to the topics mentioned in the
contents of the syllabus and their application in solving simple problems concerning assessees with the status of
individual and HUF covering the areas mentioned in the contents. The objective of Part II: Service Tax and VAT is to
gain knowledge of the provisions of service tax and VAT as mentioned in the contents of the syllabus. The division
of marks is 75 for Part I: Income-tax and 25 for Part II: Service tax & VAT.
For the purpose of acquiring “working knowledge”, what is required is generally the following:
(a) Knowledge of the basic provisions of the respective laws; and
(b) The ability to apply the provisions to solve computational problems.
A strong conceptual understanding of the legal provisions will smoothen the process of their application in
solving computational problems.
In order to achieve these goals, here are a few Do's and Don'ts.
Do's
(i) Do make a habit of regular study. This is imperative in a multi-disciplinary course like chartered accountancy
in which you have to balance the volume of the syllabus with the time available for studying. Further, in a
subject like taxation, which requires a thorough conceptual understanding of the various provisions, the
importance of regular study cannot be over-emphasized.
(ii) Do practice working out problems in a methodical manner. This will improve the ability to apply the law to
solve computational problems.
(iii) Do make a habit of remembering section numbers. Quoting of section numbers will enhance the value of the
answers.
(iv) Do try to consult the Bare Acts. This will facilitate the understanding of the logical sequence of the sections,
and will also clarify doubts that may arise.
Don'ts
(i) Don't do selective study. Make sure that you are thorough with the entire syllabus.
(ii) Don't try to consult too many books. Keep the study material for IPCC (including the practice manual) issued
by the Board of Studies as a base and consult any one of the standard books for solving practical problems.
For understanding the latest amendments, read the Supplementary Study Paper.
With a view to helping you in your endeavour, the Board of Studies brings out various publications from time to
time, as given below. You are advised to make full use of them.
88
(i) Study material for IPCC (including Practice Manual), updated with the provisions of the relevant Finance Act
would be relevant for PCC students also, however, with the exception of the following chapters in Part II:
Service tax and VAT –
Unit 2 of Chapter 2 on Taxable Services;
Chapter 5 on Input Tax Credit and Composition Scheme for Small Dealers; and
Chapter 6 on VAT Procedures.
(ii) Supplementary Study Paper - An analysis of recent question papers has revealed that considerable stress is
laid on recent amendments and developments. You are advised to update yourselves with the help of
Supplementary Study Paper which is brought out every year. In this publication, the amendments by the
latest Finance Act in both income-tax and service tax are explained.
(iii) The monthly students' journal “The Chartered Accountant Student” which contains regular academic
updates.
(iv) Revision Test Paper - You are advised to attempt answering the Revision Test Paper after you have studied the
subject thoroughly.
Finally, there are some words of advice regarding writing the papers in the examination hall.
(i) Answer the questions with due emphasis on the provisions of law. Support your answers/conclusions with
proper reasoning. Answers should be based on relevant legal provisions rather than a mere common sense
and/or guess work.
(ii) Try to quote relevant section numbers, wherever possible. However, it is better not to quote than to misquote
a section number.
(iii) Pay heed to the instructions given on the cover page of the answer paper.
(iv) Write in a neat and legible hand-writing.
(v) Answer all parts of a question one after the other; do not answer different parts of the same question at
different places.
(vi) Determine the length of the answer having regard to the marks allotted to the question.
Final Course
Final Course is composed of two levels viz., Group-I and Group-II.
It comprises of Eight Subjects of 100 marks each.
Level of Knowledge: Advanced
Group-I
Paper 1: Financial Reporting
Paper 2 : Strategic Financial Management
Paper 3 : Advanced Auditing and Professional Ethics
Paper 4 : Corporate and Allied Laws
Group-II
Paper 5: Advanced Management Accounting
Paper 6 : Information Systems Control and Audit
Paper 7 : Direct Tax Laws
Paper 8 : Indirect Tax Laws
90
PAPER 1: FINANCIAL REPORTING
Accounting is one of the core subjects in the Chartered Accountancy course. The significance of the subject can
be judged from the fact that at every level of CA course we have a paper on Accounting and that too the first paper.
At Final level the name of the paper is 'Financial Reporting'. The aim of the paper on 'Financial Reporting' is to
gain comprehensive understanding of all aspects relating to financial reporting practices and you are expected
to have an advanced knowledge of reporting practices and valuation principles used in analyzing these financial
reports.
Know your syllabus
As a first step, you should acquaint yourself with the syllabus of financial reporting so that you can plan your
studies accordingly. The study material of 'Financial Reporting' is divided in ten chapters/topics based on the
syllabus. The topics covered under this paper have been grouped for the sake of your understanding as follows:
Topic
Group
Chapter Based on
Accounting Standards
.
.
.
.
.
Accounting Standards and Guidance Notes
International Accounting Standards, International Financial
Reporting Standards, Their Interpretations and US GAAPs-An
Overview
Accounting for corporate restructuring (including inter-company
holding)
Consolidated Financial Statements of Group Companies
Accounting and Reporting of Financial Instruments
Chapter based on
Guidance Note
Share Based Payments
Chapters not based on
specific Accounting
Standards but Implication
of Provision of AS are there
Valuation of
. Tangible fixed assets
. Intangibles
. Liabilities
. Shares
. Business
Financial Reporting for
Financial Institutions
.
.
.
.
Mutual Funds
Non-Banking Finance Company
Merchant Bankers
Stock and Commodity Market Intermediaries
Developments in Financial
Reporting
.
.
.
Value Added Statements
Economic Value Added
Market Value Added
FINAL
.
.
Other
91
Shareholders' Value Added
Human Resource Reporting
Corporate Financial Reporting
Be familiar with the Knowledge inputs provided by the BoS
Once you are aware of the syllabus, the next step is to assimilate the knowledge inputs provided by the Board of
Studies.. The following knowledge inputs of BoS will held indepth understanding of the subject:
1. Study Material (Volume I and II)
2. Practice Manual (Volume III)
3. Compilation
6. Mock Test Papers
7. Students' Journal for academic updates.
Now, after knowing the various knowledge inputs provided by the Board of Studies, you should plan your studies.
Planning – Time Management
You are advised to plan your studies taking into consideration the time available vis-à-vis the course contents.
Ideally, you should plan in a manner that you keep time for two rounds of revision after your study.
Financial Reporting, the question paper is purely practical. Therefore, you have to practice solving a good number
of questions on each topic. Considering the practical nature of the paper, start your studies from the day you
receive the course material. At the final level sure you have to undergo articleship training simultaneously,
therefore, it is suggested that you should study at least twelve to fifteen hours a week. By doing so, you will be able
to mange first round of complete study and two rounds of revision well before time. Your first round of study
should be completed well in advance that is at least three months before your exam. Keep some time leverage as
assimilation of the chapters may take more time than expected or planned.
Doing three rounds of study will help in boosting your confidence level in the subject, and will make you mentally
Use of BoS Knowledge inputs in a systematic pattern
FIRST ROUND OF STUDY
As you are aware that the syllabus of Financial Reporting covers Accounting Standards and Guidance Notes on
one hand and other topics on the other hand, so your planning should also be divided in two parts namely1. Accounting Standards and Guidance Notes
Every day when you start your study first revise the concepts which you have read the previous day and then start to
92
learn new concepts. Remember, out of sight, out of mind. Ideally your first revision should be within 24 hours of
initial study, the second within the next one week.
Step 1 Study material
Start your study with the study material. In study material concepts of the topic and the accounting treatment on
various transactions has been explained in detail with adequate illustrations. Analyse the underlying concepts
and try to understand the logic behind every accounting treatment given therein. Keep questioning yourself until
you are absolutely clear on the topic. Solve the illustrations after understanding the topic. For example, in the
chapter of consolidated financial statements, first the concepts of consolidation and the consolidation
procedures have been explained, then small illustrations based on each procedure like, analysis of reserves and
surplus of subsidiary, cost of control, minority interest, treatment of dividend etc. have been given after
explaining the concept and its accounting treatment. After explaining all the concepts, questions carrying more
than one adjustment are given for your practice.
Step 2 Practice Manual
After solving the illustrations given in the study material, solve the questions given in the practice manual.
Practice Manual is highly useful for the students appearing in the examination as it includes questions from past
examinations which would facilitate in thorough understanding of the chapters explained in the study material.
In accounting paper, it is very necessary that one should practice a good number of questions dealing with
different adjustments. Practice Manual will help serve this purpose. Your first round of study should cover both
SECOND ROUND OF STUDY
Step 3 Suggested answers
Your second round of study i.e. your first revision should cover practice of suggested answers of recent two to three
examinations. Suggested answers of past few examinations give you an idea of what type of questions are asked
in the examination and how to solve and present the solution for such questions in the examination. Solving the
question paper in the examination situation will help you, not only in time management but will also give you the
confidence to attempt different types of questions in the examination.
Step 4 Revision Test Papers (RTP)
After you complete revision of whole syllabus atleast once, you should solve the questions given in the RTP. For
every examination, Board of Studies comes out with a Revision Test Paper. Revision Test Paper is issued for every
attempt containing a fresh set of questions which will help you to evaluate your preparation level. RTP of Financial
Reporting is divided into two parts namely Part I: Recent amendments, notifications and announcements which
are relevant for that particular examination and is not given in the study material or was not applicable in the
immediate past examination. You will be able to know all such relevant information applicable for the exam at
one place. Part II carries questions and answers for your practice. In Financial Reporting, questions on each topic
are given with full solution to enable you to get an insight on how to present the solutions in an orderly manner. In
Financial Reporting paper, RTP of past few attempts can also be referred subject to amendments for which you
have to refer the latest Study Material and RTP.
THIRD ROUND OF STUDY
Step 5 Mock Test Papers
After second revision of the complete syllabus, you may assess your preparation by taking mock tests conducted
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by various branches at their end. Also Mock test papers are hosted on the institute's website www.icai.org which
you may download and solve within a time period of three hours.
Important points to be kept in mind
1. Preparation of notes
Prepare concise notes in the first round of study itself. Your notes should be prepared in a manner, which
supplements your understanding of the concept and the illustrations you have solved. You may either make a
separate copy where you write down the important concepts of the chapter or can underline the important
concepts in the book itself and read those underlined portion at the time of revision. You should also shortlist the
illustrations to be revised again in your second and third round of study. Short listing of illustrations should be
based on the difficulty you faced while solving the question. Besides preparation of important points of the topic
(which will help you to recapitulate the whole concepts), a summary of tricky points and adjustments gathered
from the practice of various good illustrations may also be prepared which will help in grasping the intricate
practical aspects. Such tricky points or adjustments should be cross linked with the concerned illustration
number so that at the time of revision you not only study the accounting treatment but also refer the whole solution
again. These notes may be accompanied by the proforma of relevant accounts.
For example: when your are preparing notes for chapter 5, it is advisable that you start studying with consolidation
of one subsidiary and prepare notes by writing down the consolidation procedures for the same. Then solve
illustrations which involve two subsidiaries and one holding. Then move to the illustration which requires
consolidation of chain holding.
There are three working notes which if prepared correctly will mean that half the work has been done and then
drawing a consolidated balance sheet will be an easy task for you. These working notes are:
1. Analysis of profit of subsidiary into pre-acquisition and post acquisition period and the share of such profit to
holding and minority interest.
2. Calculation of total amount of minority interest to be shown in the balance sheet.
3. Calculation of cost of control or capital reserves arising on acquisition of shares in a subsidiary company.
For preparing the working note one, as stated above, you need following information:
a. Percentage of shares acquired in subsidiary;
b. Date of acquisition of shares that established the holding-subsidiary relationship.
c. Balance of reserves and surplus as on the date of acquisition.
d. Any revaluation of assets or liabilities on the date when such relationship came into existence
e. Any dividend outstanding, especially on preference shares.
f. Any distribution of profit in post acquisition period from pre-acquisition period either in the form of dividend
or bonus shares.
In preparing the working note 2 of Minority interest, following items are required:
a. Percentage of share capital (nominal value) (equity and preference both)
b. Share of pre-acquisition profit
c. Share of post acquisition profit
d. Dividend on share capital at point (a) above.
Likewise, you can prepare notes. Such type of notes will help you at the time of your revision, provided you write
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crisply in a manner which will easily be recapitulated.
2. User of proper and prescribed format for presentation of accounts
There are some chapters which require the solution or financial statements to be presented in particular format.
You should make it a practice to adopt the prescribed formats while solving and presenting the accounts of
particular topics. For example: Financial Statements of companies should be in the format prescribed in the
Schedule VI to the Companies Act, 1956. The format of presentation of Value Added Statement should be kept in
mind while solving the problems on that topic.
3. Recapitulation of previously read Accounting Standards and some topics
In the paper of Financial Reporting, Accounting Standards cover major portion of syllabus. So you are advised to
gain indepth knowledge of accounting standards. Here, it is worth mentioning that, out of 31 effective standards,
eighteen accounting standards were covered in the IPCC syllabus also. Since, you are already aware of the
provisions of those standards, you have to recapitulate the same and practice higher level questions in addition
to the questions dealt with at the IPCC level. Practice of higher level questions on these standards is necessary in
order to match the advanced level of knowledge required in the Paper of Financial Reporting. For remaining
standards, it is advisable to first go through the respective units of that standard in chapter one. After studying the
explanation on Accounting Standards, we recommend that you go through the text of accounting standard once.
By doing so, you will gain indepth knowledge and conceptual clarity of the standards.
4. Keep yourself continuously updated
We at Board of studies endeavor to update you with the latest amendments or notifications as and when they are
issued. One of the sections in the Students' Journal is on 'Academic Update' which contains recent
amendments in accounting also. You should be in a habit to read this continuously as it will help you in avoiding
last moment pressure to acquaint yourself with all the relevant amendments. Also list of publication comprising
of all relevant accounting standards and guidance notes are published well in time in the Students' Journal and
the institute's website to apprise you with the applicability part of the same in the particular examination.
5. Keep in mind the Inter-linking of various topics
The provision of accounting standards have to be kept in mind and applied while studying the related chapter
based on the particular accounting standard. If your concepts are clear relating to a particular standard, you
should not face any problem in applying the same to solve problems in an inter-connected chapter. Sometimes
even though the chapter may not directly relate to an accounting standard, it may contain adjustments involving
application of one or more standards.
For example, while preparing Consolidated Financial Statements of parent and subsidiary, you have to apply
provisions of AS 21. Similarly, for treatment of Investment in Associates and joint ventures you have to apply the
provisions of AS 23 and AS 27 respectively.
The provisions of various statutes should also be kept in mind while reading the chapters. For example, in the
preparation of financial statements of Companies, it is quite possible that a particular item may be dealt in two
different ways. For example - treatment of preliminary expenses has to be done on the basis of section 78 of the
Companies Act, 1956 or as per AS 26, depending on other information available. For example, if there is
securities premium shown in the books, then preliminary expenses should be written off against it. If securities
premium is not available, then preliminary expense is to be charged to Profit and loss account of that year as per
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AS 26. In such a case, AS 22 will also come into the picture. As per Income tax, preliminary expenses are
allowable in five years and as per AS 26 it is to be fully charged to Profit and Loss account of that year. This gives
rise to Deferred Tax Liability.
We have made an attempt to explain with the help of tabular form given here under the manner in which concepts
contained in the particular chapter of the study material have to be interlinked with the related provision in
another chapter of the study material and read together:
Chapter/
unit Number
Name of chapter/unit
Inter-Linking
Chapter 1
Accounting Standards
and Guidance Notes
In the paper of Financial Reporting, there are certain chapters,
study of which requires the knowledge of some specific
accounting standards. Therefore, you should keep in mind the
provisions of such accounting standards and relate them
appropriately at the time of studying that chapter.
For example
1. Provisions of AS 14 are to be applied at the time of
studying the chapter of Corporate Restructuring
specifically in the selection of method of amalgamation
and calculation of purchase consideration.
2. Provisions of Guidance Note on Accounting for Employee
Share Based Payment should be specifically kept in mind
while studying chapter 7 Share Based Payments
Sometimes, it may happen that two standards have to be
applied simultaneously. Your study should be in such a manner
that you are able to apply multiple standards to solve question.
For example,
1. Refund of government grant on account of non-fulfillment
of specific conditions attached to the grant will attract
provisions of AS 12 as well as provisions of AS 5 i.e. extraordinary item.
2. Treatment of goodwill arising from different situations
also calls for application of Accounting Standard. For
example, Goodwill calculated on consolidation is not
recommended for amortization as per AS 21. However,
purchased goodwill on amalgamation in the nature of
purchase is to be amortised over the period as per AS 14.
3. Self generated goodwill is not recorded in the books while
purchased goodwill is recorded in the books.
Note: Accounting standards are very important and questions
carrying, in total, 20-30 marks are asked in the exam from this
topic.
Chapter 2
Overview of IFRS and US
GAAPs
The chapter mentions about significance differences as well
as similarities between IFRS, US GAAP and existing
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accounting standards. Here, the knowledge acquired from
study of chapter 1 have to be applied to find out the differences
and similarities between existing accounting standards and
IFRS or US GAAPs.
Chapter 3
Corporate Financial
Reporting
This chapter explains the reporting practices followed and the
various statutes governing the functions and financial
statements of a company. Co-relate the study of this chapter
with chapter 4 regarding the role of the Companies Act, 1956,
SEBI Rules and Regulations and Companies (AS) Rules, 2006
on a company.
For example,
1. Schedule VI to the Companies Act, 1956 is basically
meant for presentation of financial statements of the
companies. The format explained therein will be used in
all the illustrations of chapter 4 requiring preparation of
financial statements viz balance sheet and profit and loss
account.
Also tr y to understand the dif ferent approaches
recommended by different Acts, and which approach to adopt.
For example
1. As per notified AS 3 of the Companies (AS) Rules, 2006,
Cash flow from operating activities can be prepared either
by direct method or by indirect method. However, as per
SEBI Regulations, cash flow from operating activities to
be presented by indirect method only.
Chapter 4
Accounting for Corporate
Restructuring
The chapter deals with restructuring of companies and
accounting treatment thereon.
Your study for this chapter should be supported by the
provisions of the Companies Act, 1956 applicable to a
company alongwith the provisions of Accounting Standards
specifically, AS 14.
For example
1. Buy back is also a form of restructuring of company's
equity. You should keep in mind the provisions stated in
section 77A of the Companies Act for buy back of shares
while solving the problems based on buy back of shares.
2. Restructuring includes amalgamation of companies.
There is a specific accounting standard which deals with
amalgamation i.e. AS 14. Therefore, you should
remember the provisions of AS 14 which you have already
studied in chapter 1 and co-relate the same while solving
the problems on amalgamation.
Like in the case of amalgamation in the nature of purchase,
purchasing company has to take the statutory reserves to their
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amalgamated balance sheet and correspondingly, debit
'Amalgamation adjustment account' till the time the statutory
reserves are shown in the balance sheet.
Note: One question of 16 marks is generally asked on this
topic.
Chapter 5
Consolidated Financial
Statements
Provisions of AS 21, 23 and 27 should be kept in mind while
studying this chapter.
For example
Adjustment of preference dividend of subsidiary companies
held outside the group at time of calculating parents share of
profit in subsidiary is as per para 27 of AS 21.
Note: This is also a popular topic and at least one question of
16 marks is generally asked on this topic.
Chapter 6
Accounting and
Reporting of Financial
Instruments
This chapter is based on Accounting Standards 30, 31 and 32
dealing with recognition, measurement, presentation and
disclosure of Financial Instruments. For better understanding
of this chapter, it is very necessary that you should be aware of
the provisions explained in the above mentioned accounting
standards.
Note: One question carrying 8 marks is generally set on this
topic.
Chapter 7
Share Based Payments
There is a Guidance Note on Employee Share Based Payment.
This whole chapter is mainly based on the above mentioned
Guidance Note. Therefore, you should study this chapter
keeping in mind the provisions of the above Guidance Note.
Note: One question of atleast 8 marks is generally asked on
this topic.
Chapter 9
Valuation
This chapter deals mainly with valuation of goodwill, brand,
and shares. For treatment of goodwill, you should keep in
mind the provisions of AS 26 and 28. Also methods of
calculating goodwill either by average profit method, or super
profit method or annuity method or capitalization method has
already been studied by you at CPT / IPCC level.
Note: This is one of the favourite topics of the paper-setter. A
question of 16 marks is generally asked on this topic.
Note: Chapter 8 deals with reporting by different financial institutions and chapter 10 deals with additional nonmandatory reporting like value added report or economic value added etc. These chapters are not specifically
inter-related with any other chapter or any accounting standards.
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It is observed in the past examination that atleast one question carrying two sub-parts of 8 marks each is asked
on this topic. Sometimes small questions of 4 to 5 marks are also asked from the Chapter 8.
Disclaimer: The marks mentioned above are to explain the relative importance of the topic and not to recommend
selective study in any case. The above marks may change depending on the length of the questions selected and
the calculations involved therein.
Tips for examination
Besides the general tips given in the first part of this booklet, certain tips mainly concerning the accounting paper
are:
1. Use of proper formats
Certain statutes prescribe specific formats for presentation of the accounts. You should take care of the same at
the time of solving the questions in the exam. Accounts presented in the prescribed manner will help you in
scoring due marks.
2. Adequate Working Notes
In accounts, your solution is generally divided in two parts viz- main solution and working notes. Working notes
form part of your solution and carries marks. Therefore, it is advised that calculations made on your calculator
should also be written in your answer sheet as working note, wherever required, neatly and precisely. Also your
working note should be cross referenced with the figure used in the main solution so that examiner can easily
understand that how you have arrived at the particular figure.
3. Answer the questions with due emphasis on the provisions of Accounting Standards
Support your answers/conclusions with proper reasoning. Answers for questions based on accounting
standards should be supported with provisions of that accounting standard rather than a mere common sense or
guess work. It is not required to quote paragraph number of Accounting standard but you are expected to quote
accounting standard number alongwith the name of the standard. However, if you state, paragraph number of
accounting standard, then it will add value to the solution and will also help create a good impression in the mind
of the examiner. You should quote number of accounting standard or name only when your are sure. It is better
not to quote than to misquote the accounting standard number.
4. State the assumption clearly
In case a question leaves room for making an assumption and there is a possibility of more than one assumption,
it is important to clearly state the assumption you have taken and solve the question accordingly. For example, in
case of valuation of goodwill, if question does not clearly state as whether to take closing capital employed or
average capital employed and there is scope of calculating both, then clearly mention your assumption in the
answer-sheet.
Conclusion
Your professional approach and qualitative effort is the key to pass CA examination. To be a successful chartered
accountant you should be able to analyse and develop an understanding of published financial statements and
annual reports of companies. This exercise will enable you to know, how the various accounting concepts,
conventions, rules, principles and standards are applied in real life situations.
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PAPER 2: STRATEGIC FINANCIAL MANAGEMENT
The subject “Strategic Financial Management” (SFM) is basically a blend of Financial Management and Strategic
Management, which is the need of today's dynamic world. In today's time Chartered Accountants are being
called upon not only to assume finance function but also for planning, operating and monitoring of the other
functions as well. With the globalization of the Indian economy the finance function has acquired critical
importance especially in the field of International Financial Management. Further, the finance function also
become crucial as the now a days various types to structured financial are in the market.
The aim of this paper is to test whether students have acquired a sound knowledge of the advanced concepts and
techniques of financial management (both domestic and international), capital market and financial products
etc. and to test the ability of applying them in real life situations .
Broadly the whole syllabus of the paper can be divided into following sections:
Section
Topics
I
.
.
.
.
Financial Policy and Corporate Strategy.
Project Planning & Capital Budgeting.
Leasing decisions including cross border leasing.
Dividend decisions.
II
.
.
.
Indian Capital Market including role of various Primary and Secondary Market
Institutions including Capital Market Instruments, Commodity derivatives,
OTC derivatives and Forward Rate Agreement.
Security Analysis.
Portfolio Theory and Assets Pricing.
III
.
.
.
Financial Services in India.
Mutual Funds.
Money Market Operations.
IV
.
Foreign Direct Investment, Foreign Institutional Investments and
International Financial Management.
Foreign Exchange Exposure & Risk Management.
V
.
Mergers, Acquisitions and Restructuring.
The Section-wise analysis of the syllabus is as follows:
Section I
The first topic of the Section I study the interface of Financial Policy and Strategic Management. Second topic
aims at developing ability to analyse and apply various techniques for Capital Budgeting decision under Risk and
Uncertainty conditions. Topic of leasing is related to decision for mode of financing to acquire any asset either on
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lease basis or borrow and buy basis. After dealing with complicated issues of decision making next comes
theories relating Dividend Decision, involving the decision related distribution of surplus.
The topic of Financial Policy and Strategic Management being of theoretical nature can be directly referred from
the Study Material. However, in order to analyze the nature of question usually asked in examination, Practice
Manual shall be proved very helpful.
In examination from remaining three topics most of the times numerical questions are asked in addition to
theoretical questions. Therefore students are advised to refer Practice Manual as in the beginning of every
chapters it contains brief summary of the topics covered as well as important formulae. Students, after going
through this summary and formulae can attempt as many as numerical questions for practice purpose.
In questions of Capital Budgeting and leasing special attention should be paid to following points:
Think about the amount and timings of cash flows.
Correct discounting rate should be applied for computing the Present Values.
Taxation aspects of the decision taken.
.
.
.
The topic of Dividend Decision is based on various Dividend theories and models. Accordingly, students should
attempt practical problems from Practice Manual for better understanding of these models. In examination it is
very important to apply correct model as per the facts and figures given in the question.
Section II
First topic of this Section is based on the study of Indian Capital Market and latest financial products such as
derivatives ,indexed funds etc. and aims to develop understanding of nature, structure and structure of these
products. Next topic with which students are supposed to be well versed is Security Analysis consisting of
Technical and Financial Analysis including special insistence on Bond Valuation. The residual topic of this
Section is Portfolio Management involving theories related to the allocation of funds among various option
available for investment to optimise the return.
From this Section in Examination both theoretical as well as practical questions are asked in Examination. It is
advisable for students after a plain reading of the topics covered in Study Material they should refer Practice
Manual to understand the nature and type of theoretical as well as numerical questions asked in Examination.
The important points that should be kept in view by students are as follows:
Proper understanding of important concepts e.g. derivatives etc. for both theoretical as well as practical
point of view.
. Correct formula should be applied in questions of Portfolio Management, Security Analysis etc..
.
Section III
The main topics of this Section are Mutual Fund and Financial Services. Since with the development of financial
market a variety of Financial Services have emerged. The topic of Financial Services deals some kind of these
Financial Services. Mutual Fund is one of the important topic of this Section as now a days Mutual Fund
Investment is very popular among the small investors. This topic involves the study of the various schemes of
mutual fund and their evaluation.
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In examination most of the times practical questions are asked, although theoretical portion is also important
and should not be ignored at all. The students are advised to attempt practical questions of the topic of Money
Market from Practice Manual because of their unique nature and normal repetition in Examination.
Further while attempting the numerical questions of Mutual Fund following points should be kept in view.
Correct calculation of NAV.
Correct calculation of additional Bonus Units in case of reinvestment of income.
.
.
Section IV
Since now a days Indian economy has become a global economy, management of foreign exchange has become
unavoidable. Accordingly one chapter on FDI and FIIs briefs about various sources of international financing and
financial management in international context. Next topic mainly deals with foreign exchange rate mathematics
and its risk management techniques.
The first topic of this Section is more theory oriented. Hence, in addition of plain reading of this topic from Study
Material students are advised to refer Practice Manual to understand what types of question are asked in the
examination.
The topic of Foreign Exchange Risk Management is more practical oriented and is important from examination
point of view. While attempting numerical questions of this topic, following points need additional attention:
. Using correct symbol for currencies of different nations.
. Carefully determine whether any foreign currency is at premium or discount.
Section V
With the spread of Merger and Acquisition trend in last few years, the study of Merger and Acquisition decision
from financial point of view has become a strategic decision. A chapter on Merger and Acquisition dealing with
such strategic decision is there. This is inclusive of the Business Valuation, Financial Restructuring and Demerger
etc.
This topic is important from examination point of view. Student must be able to value financial assets, such as
equity shares etc. and a business as a whole.
Evaluation of financial choices is key theme here and candidates are expected to be able to discuss, as well as
apply a range of Valuation methods.
PAPER 3: ADVANCED AUDITING AND PROFESSIONAL ETHICS
Auditing is an important area of core competency of the Chartered Accountancy Profession. It is the heart of CA
course as much as it is at the head of the profession of Accounting. In a way, Auditing is the conscience keeper of
Accounting and is closely related to Accounting, Management Accounting, Company Law, Taxation and other
subjects. A good knowledge of these latter subjects is a pre-requisite for acquiring proficiency in Auditing theory
and practice. Thus, while studying the subject of Auditing, students should also draw their knowledge from the
above subjects and adopt an integrated approach for the purpose as this is the subject which involves application
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of theoretical knowledge of other subjects.
Auditing is largely a practical and application discipline. A mere bookish knowledge of concepts, procedures and
processes has little meaning except for examination purposes at a relatively general level as in undergraduate
and graduate courses. But in a professional course like Chartered Accountancy, students learn the Auditing
concepts and techniques as also their intricacies purely for purposes of applying them in practice in their audit
work.
The syllabus of Advanced Auditing and Professional Ethics is divided into twenty two chapters in our study
material covering in detail, principles of Auditing, Standards on Auditing issued by the ICAI, reporting on internal
control as a part of Risk Assessment and Internal Control, specific audit issues classified by organizations like
Company Audit, Audit of Banks, Audit of General Insurance Business, Audit of Co-Operative Societies, NBFCs
and Audit of Public Sector Undertakings, special audit issues like audit under Fiscal Laws, role of auditor under
clause 49 of the Listing Agreement, Audit of Consolidated Financial Statements, Investigation and Due
Diligence, Salient features of Sarbanes Oxley Act, 2002. In addition to above, Peer Review is considered as an
important step towards maintenance and improvement of audit quality similarly, Professional Ethics are
regarded as a foundation to the audit function, which is essentially developed on the foundation of ethical norms,
which has so far brought name and fame to the profession. You all students of Final course should read these
chapters with sincerity and imbibe the norms explained. These norms should be the guiding force while you will
work as a chartered accountant.
You, at Final level in particular should gain good knowledge and expertise of Engagement and Quality Control
Standards and also keep yourself well informed on the contents of various Guidance Notes, The Companies Act,
1956, Tax Audit, Code of Conduct and Professional Ethics, Statements on Qualifications in Auditors Report,
Statement on CARO, 2003, and Statement on Peer Review etc. issued by the Institute. You should understand the
concept underlying the problems. The clarity in the concept will help for dealing the questions.
The auditing knowledge inputs provided by the Institute through the study material and other publications and the
practical training inputs provided by the Audit firms during the practical training stage reinforce one another. You
should, as part of your practical training, involve yourself deeply in the professional audit work done by your
principals for the purpose of getting an intense practical knowledge and skills in Auditing. This will help to
measure up to the examination standards in the subject in which questions are meant to test the applicational
knowledge/expertise.
For the purpose of its full coverage you may segregate the syllabus of this paper into seven parts for preparation.
In first part you may prepare Engagements and Quality Control Standards on Auditing (SA/SRS/SRE/SAE) and
Guidance Notes for which list of applicable standards are published by ICAI on time to time. For doing preparation
for Part First, read the bare standard alongwith its application and other explanatory material. After reading this
you are advised to draw a flow chart or some diagrammatic presentation for your better understanding and
revision purpose. You are also expected to focus on the application aspects of each of the Auditing Standards and
guidance notes. As it is important to have the basic understanding, the objective is to the gain the ability to
practice the same in the working scenario.
In part two, you may prepare audit strategy, planning and programming, risk assessment and internal control
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evaluation, audit under computerized information system (cis) environment, special audit techniques like
selective verification; statistical sampling: special audit procedures; physical verification of assets, direct
confirmation of debtors and creditors, analytical review procedures, risk-based auditing etc. While doing
preparation for this part, you may interlink it with Auditing Standards, specially the series of SA 300 – 499 i.e.
Risk Assessment and Response to Assessed Risks and series of SA 500 – 599 Audit Evidence.
For the preparation of Audit Strategy, Planning and Programming, you should practice developing an
“Engagement Approach Document”. The Approach document should primarily outlined the activity based
scoping of an engagement and planning of the procedures for each of the activity. An Approach Document should
treat each engagement as a project which would highlight the resource requirements in each activity area and
scheduling as well.
Similarly for the Risk Assessment and Internal Control Evaluation you should gain understanding of the Risk
Management Framework; relevance of control procedures, control assessment questionnaires and the
complementary role that the internal and external audit plays.
Further you should apply the accounting knowledge; and business intelligence framework along with the ratio
analysis and trend reviews for any un-reasonable gaps in inputs provided / made available.
In part three, you may incorporate audit of limited companies, rights, duties and liabilities of auditors, third party
liability and Audit Committee and corporate governance. For better understanding, you must have good
knowledge of the Companies Act, 1956 which is pre-requisite. Not only knowledge but updation of knowledge is
also required on time to time basis.
In part four, you may include Audit Reports and Audit of Consolidated Financial Statements. While doing study of
Audit Reports, you may interlink this with series of SA 700-799 i.e. Audit Conclusion and Reporting, Statement on
CARO, 2003 and Statement on Reporting under Section 227 (1A) of The Companies Act, 1956. You are also
required to practice the drafting of qualifications. You may also scan through the Annual Financial Statements of
Companies to analyse the notes and qualifications, if any, incorporated by the Auditors in their Audit Report.
In part five, you may include miscellaneous audits like audit of banks, insurance companies, co-operative
societies, nbfcs, audit under fiscal laws, cost audit and special audit assignments. For the preparation of part
five, deep knowledge of statutory requirements is a pre-requisite for validation of adherence of the business with
applicable laws. For this you should follow a check-list approach ensuring completeness of compliance
validations. Further, you should update yourself with latest notification, circulars etc. You may also interlink the
above part with guidance notes already covered in part one.
In part six, you should prepare special features in audit of public sector companies, internal audit, management
and operational audit, investigation and due diligence and concept of peer review. For the preparation of this
part, you are again required to have sound knowledge of statutory requirements.
Last but not the least; in the seventh part you may prepare Professional Ethics. Generally it has been observed
that there is one question i.e. case studies based question of 16 marks in the examination paper. For better
preparation of this part you are advised to read the 22nd Chapter of the Study Material in detail which elaborates
104
this topic alongwith example. Further, you may write down all the clauses in notes form for the revision purpose.
While answering the case studies based question, answer should be split in to Two parts, first one is Fact of the
cases and second one is the relevant concept and finally give your good conclusion in this way the case study and
application oriented theory questions can be handled.
As in all other subjects of CA course, to excel in Audit proper preparation and planning is very much required to
avoid failure. Further Audit is a paper which requires a practical approach towards actual Audit work. You should
in the first instance focus on studying Auditing concepts, procedures and techniques from the study material. The
knowledge being so derived may be related by the students to the practical work in the field of Auditing which they
do as part of their Articles training.
Part three, five and six are based on statutory requirement. Therefore, you must be cautious about the
amendments and updates happened at least six months before the exam and also go through the other
amendments. Further, you should also take a keen interest in updating yourself on contemporary developments
in the field of auditing by regularly referring to articles on Auditing in CA Journal, Students' monthly Journal and
other relevant professional journals, publications and books.
It is also advisable to mention applicable Engagement Quality Control Standards or Accounting Standards or
Sections in audit paper wherever required. Answers should be crisp, precise and to the point to secure good
marks.
Audit is a paper requires lots of quick and logical application of mind to answer practical problems. Hence, give a
reading to ICAI audit study material and Practice Manual to understand the depth and figure out the efforts and
time required for preparation. In addition to study material suggested answers of past examination, Revisionary
Test Papers, Standard book etc should also be read. Finally don't forget to revise as revision is also very important
to crack the examination.
PAPER 4: CORPORATE AND ALLIED LAWS
Introduction
The liberalization and globalization of our economic policies in tune with the global changes brought several
reforms in the Corporate and Allied Laws of our country. A scheme of well-structured Corporate and Allied Laws is
a sine qua non for the corporate growth. No corporate entity can effectively work and survive without meeting its
legal obligation. Corporate law is the study of how shareholders, directors, employees and consumers, the
business community and the environment interact with each other. The Corporate Law defines the internal rules
of the company. These laws are being amended and fine tuned from time to time in accordance with the changes
that are taking place within the country as well as outside. This process will continue to be more dynamic in times
to come, vibrant for corporate growth, infusing more capital into the country and at the same time protect and
safeguard the interests of various stakeholders.
Syllabus Coverage
At the Final level, Paper-4 deals with Corporate and Allied Laws, where the level of knowledge prescribed is that of
'Advanced knowledge.' The paper consists of two sections:
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Section
Name
Marks
105
Objective
Section A
Company Law
70
To be able to analyze and apply various provisions
of the Companies Act, 1956 in practical situations
Section B
Allied Laws
30
To develop ability to analyze the requirements of
laws stated in the Section
In brief, the students are expected to have not only analyzing skills but also application skills in company law,
while in allied laws they are expected to have the analyzing skills (an overview of various allied laws) stated in the
syllabus. Accordingly, preparation strategy deserves care, concern and caution.
Major topics to be focussed
Our study material of Corporate and Allied Laws is divided into 22 chapters. Students may focus on the following
chapter wise major topics from the examination perspective:
Chapter No.
1.
2.
Name of the Chapter
Accounts And Audit
Dividend
Major Topics
.
.
.
.
.
.
.
.
.
.
.
.
Maintenance of Books of Accounts
Persons who can Inspect
Persons Responsible for Maintenance & Penalty
Form and Contents of Balance Sheet and Profit and
Loss Account
Deviation from Accounting Standards
Authentication of Annual Accounts
Filing with the Registrar
Holding & Subsidiaries Accounts
Disqualifications of Auditors
First Auditors
Subsequent Auditors
Auditors' Appointment by Special Resolution
Ceiling on Number of Audits
Remuneration of Auditors
Special Audit
Audit of Cost Accounts
.
.
.
.
.
.
.
.
Compulsory Transfer to Reserves
Transfer of Higher Percentage of Profits to Reserves
Declaration of Dividend out of Past Reserves
Declaration of Interim Dividend
Time Limit
Unpaid or Unclaimed Dividend
Payment of Unpaid or Unclaimed Dividend
Investor Education & Protection Fund
.
.
.
.
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3.
Directors, Powers,
Managerial
Remuneration
.
.
.
.
.
.
.
.
.
Appointment of Directors
Share Qualification for Directors
Powers of Directors and Restrictions thereon
Directors not to hold Office or Place of Profit
Loans to Directors (Section 295)
Political Contributions
Managerial Remuneration
Managing Director
Inter Corporate Loans and Investments
4.
Meetings, Powers Of
The Board And Related
Party Transactions
.
.
.
.
Introduction
Meetings of Directors
Disclosure of Interest In Contracts
Sole Selling Agents
5.
Inspection And
Investigation
.
.
.
Inspection
Investigation
Power of Inspectors
6.
Compromise,
Arrangements And
Reconstructions
.
.
Compromise and Arrangement
Reconstruction
7.
Prevention Of
Oppression And
Mismanagement
.
.
Oppression and Mismanagement
Who May Apply To The Company Law Board When
Oppression or Mis-Management Is Complained of?
Powers of The Company Law Board on Application
Under Sections 397 or 398
.
9.
Corporate Winding Up
And Dissolution
.
General Provisions on Winding-up
10.
Producer Companies
.
.
.
.
.
.
.
Objects and Formation of a Producer Company
Memorandum Of Producer Company
Articles of Association
Management
General Meetings
Share Capital and Member Rights
Finance, Accounts and Audit
11.
Companies
Incorporated Outside
India
.
.
Foreign Companies
Application of Sections 592 to 602 to Foreign
Companies
Documents, etc., to be Delivered to the Registrar By
Foreign Companies
.
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.
.
Registration of Prospectus
Requirements as Regards Prospectus
12.
Offences And
Penalties
.
Offences Compoundable – Section Wise List
13.
E-Governance
.
.
.
MCA 21 Project
Director Identification Number (DIN)
Some FAQs on DIN and E-filing
14.
Other Relevant
Miscellaneous
Provisions Of The
Companies Act, 1956
.
.
Government Companies
Provisions for Removal of Administrative Difficulties
15.
Corporate Secretarial
Practice - Drafting Of
Resolution, Minutes,
Notices And Reports
.
.
.
Certain Companies to have Secretaries
Company Correspondence & Reports
Record Maintenance and Filing of Documents
16.
The Securities And
Exchange Board Of
India (SEBI) Act, 1992
.
.
.
.
Establishment of SEBI Board
Powers & Functions of SEBI
Penalties
SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009
17.
Securities Contracts
(Regulation) Act, 1956
.
.
.
.
.
About Corporatisation & Demutualisation of Stock
Exchanges
Granting of Recognition
Power of SEBI
Power to Make Rules
Power of SEBI to Make Regulations
18.
Foreign Exchange
Management Act,
1999
.
.
.
.
Analysis Of Important Definitions
Regulations And Management Of Foreign Exchange
Contraventions and Penalties In Brief
Adjudication and Appeal
19.
The Competition Act
2002
.
Definitions
20.
Overview Of Banking
Regulation Act, 1949,
The Insurance Act,
1938, The Insurance
Regulatory And
.
.
.
.
.
.
Reserve Fund
Audit
Provisions Related To Insurance
Important Definitions
Enforcement of Security Interest
Miscellaneous Matters
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108
Development Authority
Act, 1999, The
Securitisation And
Reconstruction Of
Financial Assets And
Enforcement Of
Security Interest Act,
2002
21.
Prevention Of Money
Laundering Act, 2002
.
.
Definitions
Obligation of Banking Companies, Financial Institutions
and Intermediaries
22.
Interpretation Of
Statutes, Deeds And
Documents
.
.
Rules of interpretation/construction
Internal aids to interpretation/construction
Level of Knowledge
Since the level of knowledge required in this subject is that of Advanced Knowledge students should adopt
practical application oriented and analytical approach. Several Final students seem to be somewhat hesitant or
reluctant in giving enough attention to the provisions of various Acts and hence they tend to give a general
approach to the subject which should be avoided. From the very beginning a planned approach for preparation in
the subject needs to be developed.
A common comment of examiners at the Final paper relating to Law subjects was that candidates were generally
weak and slippery in their knowledge of basic provisions of the relevant laws as well as in application of
knowledge and skills. Students have to especially strengthen themselves on this front since working knowledge
and application-oriented questions carry considerable number of marks in this paper.
Orientation to Paper
In this paper, students should be able to pinpoint the legal point or issue involved in any statement of a problem or
issue and synchronize with the relevant legal provisions clearly and in a logical manner. Secretarial Practice
relating to Laws should also be given due weightage for study purposes. Students have to be always alert in
updating their knowledge of current developments, recent amendments in relevant laws and recent legal
decisions by regularly consulting journals like Chartered Accountant and Chartered Accountant Student. Final
course students have to be thoroughly knowledgeable of important guidelines, leading judgements,
notifications etc. Amendments if any taking place in any of law should be applicable for the examination provided
it is six months prior to the examination and if any Bill has become an Act, they should see that whether the
sections in the said Act/Amendment has been notified or not.
Avoid selective reading of chapters, as the question paper contains compulsory questions with coverage on all
the chapters. Changes by way of important amendments and having a wider ramification and consequential
impact on other Acts as well effect of other provisions within the law should be more specifically read and
understood. Give thoughts to your analysis in the form of various practical issues and situations and how you
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would as an Expert by giving advice on the said matter. A scan through the previous year's examination papers will
give an idea as how the questions are framed so that preparation can be synchronized in that direction. While
reading study material you will come across different practical problems which you may note down separately.
This will enable you to consolidate your reading with practical analysis in an easier and time-bound manner. Cross
check your answers to the problems with the logical analysis of the sections and draw your conclusions
accordingly. Writing generalized answers should be avoided as it reflects your low preparation in the subject.
Prioritize your chapter reading based on time for consumption and weightage given in terms of marks. In nut shell
you have to prepare a Balanced Score card in the subject for yourselves so that you emerge as a winner.
Bare Acts
They are the life blood to law and it is very much essential to have relevant Bare Acts while reading the study
material. While reading Bare Acts, you may test yourself side-by-side as to which of the subject-matter is dealt by
what section.
Sections and Case Laws
It is desirable to support answers with relevant sections and leading case laws on the matter wherever necessary.
Extra efforts are to be made in this direction. If by any chance, students do not remember the Section numbers
and Case Law while answering any question in the examination paper on the subject, they may not lose heart on
this score. They may otherwise strengthen their answer by appropriate reasoning and examples. However, they
may desist from citing wrong Section numbers or irrelevant Case laws.
Develop Drafting Skills
The paper also includes secretarial practice relating to various laws and it is therefore important, that students
should pay equal importance to drafting skills such as drafting resolutions, agenda, notices and minutes of
meetings of the company and filing a petition/application before the Company Law Board.
Language
This is an important area of concern and advice for the students. A common feedback from the Examiners was that
students are generally weak in the English Language though they are thorough in the subject. As a result, the
presentation of answers does not give a brand image as of a candidate at the Final Level. This problem among
many of the candidates can be overcome only by way of writing practice and also undertaking self-examination.
Handling Application Oriented Questions
Since, 90 to 95% of the paper is based on Application/Problem oriented questions; students should know how to
answer these questions for scoring good marks. While attempting practical/application oriented questions,
students should be able to pinpoint the legal points or issues involved in any statement, problem or situation
given in the question.
The answer to the application oriented question may be presented as following:
(i) Heading (If possible)
(ii) Relevant Legal Provision (with Correct Section Number and Correct name of the Act with year)
(iii) The facts given in the problem
(iv) Correlation of the legal provision with the facts.
(v) Conclusion
110
We can take the help of the following example for better understanding:
Example: The Board of Directors of XYZ Limited consists of Mr. P, Mr. Q (Directors) and Mr. R (Managing Director).
The company has also employed a full time Secretary.
The Profit and Loss Account and Balance Sheet of the company were signed by Mr. P and Mr. Q. Examine whether
the authentication of financial statements of the company was in accordance with the provisions of the
Companies Act, 1956?
Sample Answer
Heading
Authentication of Balance Sheet and Profit and Loss A/c (Section 215 of the Companies Act, 1956):
Relevant Legal Provision
According to Section 215 of the Companies Act, 1956, except in the case of a banking company, the Balance
Sheet and Profit and Loss Account of a company must be signed on behalf of the Board of directors by two
directors and the Manager or Secretary, if any. If the company has a Managing Director, he should be one of the
signing directors.
Facts of the case
In the instant case, the Balance Sheet and Profit and Loss Account have been signed by Mr. P and Mr. Q, the
directors.
Correlation
In view of Section 215 of the Companies Act, 1956, Mr. R, the Managing Director should be one of the two signing
directors. Since the company has also employed a full time Secretary, he should also sign the Balance Sheet and
Profit and Loss Account. In addition to the Managing Director, Mr. R, one of the directors, either Mr. P or Mr. Q
should sign it.
Conclusion
Thus, authentication of financial statement of the company is not in accordance with the provisions of the
Companies Act, 1956.
Hence, by writing your answers in this style would definitely improve your performance and help you in clearing
this paper with good marks.
PAPER 5: ADVANCED MANAGEMENT ACCOUNTING
The subject of Advanced Management Accounting focuses on developing knowledge required for analysis of
financial and non-financial information in order to help the management in decision making. In other words,
analysis is the integral part of Management Accounting. Keeping this in mind, the syllabus and study materials
have been developed. The students are suggested to understand the concept of each topic, use of relevant tools
and techniques involved in the analysis of various problem situations covered under the syllabus. The most
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important thing is that the problem related to Management Accounting in practical situation may often involve
various issues together. This explains that the students are required to develop a comprehensive understanding
of handling multiple issues involved in a problem which are closely linked and take all the factors into
consideration related to a problem while evolving a rational solution.
The Study Materials have been developed to explain different concepts, tools and techniques related to
Management Accounting with examples and illustrations. The students are suggested to go through the study
materials and conceptualize the topics given in the syllabus and understand depth of knowledge required for
achieving success in the examination. Moreover, they are expected to read some standard text books to develop
more in-depth clarity in thoughts on different topics of the subject and work out a variety of problems for practice
and better performance in the examination. It may be noted that there may be more than one approach to the
solution of a problem.
The general guidelines for preparation of examination are given below. However, a student may modify approach
to suit him most according to his convenience and reading habits. General guidelines are:
.
.
.
.
.
.
A student should read a new concept again and again till he gets clarity about it.
They should make their own note on the concept.
Notes may be developed on logic of the steps involved in the solution to a problem.
They should solve the problems on their own and check the differences/ incorrectness in their approach.
They should prepare note on theoretical topics to improve their presentation in the examination.
Regular revision of notes will keep in good stead.
The advantages of following the above mentioned guidelines are:
.
.
.
.
.
Synthesis of concept brings more clarity.
Revision becomes easier and quicker.
Well thought out logical sequence will lead to easy solution to problem.
Structured steps save time greatly.
Preparation is well focused for examination.
Once all the chapters are covered thoroughly, a student is suggested to go for self evaluation by solving a question
paper or a mock test paper. The advantages of it are:
.
.
.
.
Exposure to unknown questions
Understanding the deficiencies/gap and developing plan to make it up
Practice on better time management
Gaining necessary confidence for success in the examination.
PAPER 6: INFORMATION SYSTEMS CONTROL AND AUDIT (ISCA)
Introduction
Current era is called 'Digital or IT era'. Dependency on IT enabled services is increasing at a very fast rate. The
traditional working setups/systems are being replaced by the technology driven frameworks and networks. The
112
flexibility of the software systems has transformed the success stories of the organizations' mission, plans, and
policies. For example, in banking, CBS has been adapted in most of the recognized banks to run their day-to-day
operations in a transparent, fast and smooth manner. Accordingly, accounting professionals have to interact with
computer-based Information systems on a regular basis. As primary users of information systems in
organizations, accountants need to participate in the design, development and operations of IT systems. In
addition, they need to measure and evaluate the performance of information systems with the help of appropriate
controls. Internal and external auditors must assess the quality of information systems and evaluate the accuracy
of information input and output. Hence, Chartered Accountants must have the conceptual clarity to deal with
different controls adapted in these systems and other important tasks.
In today's dynamic and changing economic environment, businesses are subjected to greater risks than ever
before. Accordingly, auditors should also be in a position to identify the business risks that an organization can
face and the risk management policies that an organization has to adapt to effectively manage those risks and
particularly for Information Systems and their security. There are a number of Chartered Accountants, who work
as IS Auditors in their professional life in the environment of information systems. In addition, some of them work
as IT Managers, responsible for the development of application systems, starting from the requirements analysis
and till system maintenance.
For all these tasks, CAs require a thorough knowledge/understanding of the concepts of IT. Like any other
subject, IT subject is also very vast; however, topics relevant from Chartered Accountants perspective have been
covered at IPCC and Final level. The paper on Information Systems Control and Audit (ISCA) forming a part of the
final syllabus helps the students to understand 'how to evaluate controls and standards for information systems
in an organizational environment'. The basic knowledge about Information Technology gained at IPCC level is
sought to be built up further through this paper.
The study material of ISCA is divided into ten chapters based on the syllabus. The following major topics are
covered under this paper:
Chapter No.
1.
Reference to the
syllabus/ Name of the
Chapter
Information Systems
Concepts
Topics
.
.
.
.
.
.
.
.
.
.
.
Introduction
Definition of a system
Types of System
General Model of a System
System Environment
Information
Information System and its role in Management
Types of Information Systems at different levels
Operations Support Systems (OSS)
Management Support Systems (MSS)
Office Automation Systems (OAS)
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2.
System Development
Lifecycle Methodology
.
.
.
.
.
.
.
.
.
.
.
.
.
Introduction
System Development Process
System Development Methodology
System Development Life Cycle (SDLC)
The preliminary Investigation
System requirement analysis
Systems Design
System Acquisition
Development: Programming Techniques and Languages
System Testing
Post Implementation review and maintenance
Operation manuals
Auditors' Role In SDLC
3.
Control Objectives
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Information Systems Controls
Need for Control and Audit of Information Systems
Effect of Computers on Internal Controls
Effect of Computers on Audit
Responsibility for Controls
The IS Audit Process
Information Systems Control Techniques
User Controls
System Development and Acquisition Controls
Control Over System and Program Changes
Quality Control
Controls Over System Implementation
System Maintenance
Post Implementation Review
Control over Data Integrity, Privacy and Security
Security Concepts and Techniques
Data Security and Public Networks
Unauthorized Intrusion
Hacking
Data Privacy
Controlling Against Viruses and Other Destructive
Programs
Logical Access Controls
Physical Access Controls
Environmental Controls
.
.
.
.
.
Introduction to basics of testing (Reasons for testing)
Audit Planning
Audit Testing
Testing critical control point
Test effectiveness of Information System Control
4.
Testing – General and
Automated Controls
113
114
.
.
.
.
Test of general controls at the entity wide and system
level
Tests of general controls at the business processapplication level
Tests of business process application controls and user
controls
Appropriateness of control tests
Multiyear testing plans
Documentation of control testing phase
Audit reporting
Concurrent or continuous audit and embedded audit
modules
Hardware testing
Review of hardware
Operating system review
Reviewing the network
.
.
.
.
.
.
.
.
5.
Risk Assessment
Methodologies and
Applications
.
.
.
.
.
.
.
.
.
Introduction
Risk, Threat, Exposure and Vulnerability
Threats to the computerized environment
Threats due to cyber crimes
Risk Assessment
Risk Management
Risk Identification
Risk ranking
Risk mitigation
6.
Business Continuity
Planning and Disaster
Recovery Planning
.
.
.
.
.
.
.
.
.
.
.
.
.
Introduction
Business Continuity Planning
Developing a Business Continuity Plan
Types of Plans
Threats and Risk Management
Software and Data Back-up Techniques
Alternate Processing Facility Arrangements
Back-Up Redundancy
Disaster Recovery Procedural Plan
Insurance
Testing Methodology and Checklist
Audit Tools and Techniques
Audit of the Disaster Recovery/Business Resumption
Plan
7.
An Overview of
Enterprise Resource
Planning (ERP)
.
.
.
Introduction
ERP-Definition
Business Process Reengineering (BPR
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.
.
.
.
.
.
.
.
ERP Implementation
Post Implementation
Risk and Governance Issues in an ERP
How does EPR fit with E-Commerce
Life after Implementation
Sample List of ERP Vendors
ERP Software Package (SAP)
Case Studies
8.
Information Systems
Auditing Standards,
Guidelines, Best
Practices
.
.
.
.
.
.
.
.
.
.
Introduction
IS Audit Standards
ISO 27001- The information security standards
CMM- Capability Maturity Model
COBIT – IT Governance Model
COCO
ITIL (IT Infrastructure Library), its details
Systrust and Webtrust
HIPAA
SAS 70 – Statement of Auditing Standards for Service
Organizations (AICPA)
9.
Drafting of IS Security
Policy, Audit Policy, IS
Audit Reporting – A
Practical perspective
.
.
.
.
.
.
Introduction
Important of Information System Security
Information System Security
Protecting Computer-held Information Systems
Information Security Policy
Types of Information Security Policies and their
Hierarchy
Audit Policy, purpose, scope etc.
Audit Working Papers and Documentation
IS Audit Reports
Sample IS Security Policy with case studies
.
.
.
.
10.
Information
Technology
(Amendment) Act,
2008
.
.
.
.
.
.
.
.
.
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Brief History
The IT Act 2000/2008 and its Objectives
Preliminary [Chapter I]
Digital Signature and Electronic Signature (Amended
Vide ITAA 2008) [Chapter-II]
Electronic Governance [Chapter III]
Attribution, Acknowledgment and Dispatch of Electronic
Records [Chapter IV]
Secure Electronic Records and Secure Electronic
Signatures [Chapter V]
Regulation of Certifying Authorities [Chapter VI]
Electronic Signature Certificates [Chapter VII]
116
.
.
.
.
.
.
Duties of Subscribers [Chapter VIII]
Penalties and Adjudication [Chapter IX]
The Cyber Appellate Tribunal (Amended Vide ITAA-2008)
[Chapter X]
Offences [Chapter XI]
Intermediaries Not To Be Liable In Certain Cases
(Substituted Vide ITAA-2008) [Chapter XII]
Miscellaneous [Chapter XIII]
Chapter-wise Tips for Preparation
First of all, students should try to understand the linkages between the chapters at macro-level. This will help
them in recollecting the concepts during examination. Chapterwise tips are given as follows:
1. As the name of the paper is 'Information Systems Control and Audit'; it is highly desirable that first of all,
students should understand about the information systems and its related concepts. Accordingly, first
chapter of ISCA is “Information Systems Concepts”, which provides an overview of different information
systems. In this chapter, students should clearly understand the general concepts of the systems, and their
types. After understanding the general concepts related to systems, students should thoroughly study the
information, its various attributes, and different types of information systems such as MIS, DSS, EIS, and ES
etc. For each type of information systems, its features, attributes, advantages, and limitations must be
clearly understood. Students should thoroughly understand the major points/subheadings as given in the
material; however, they may write the description of these points in their own language with coverage of
related concepts.
2. As the paper is basically dedicated to Information Systems controls, only the generalized knowledge of
information systems is not sufficient; various concepts of the Software Development Life Cycle are also
needed. Accordingly, the second chapter is on SDLC in which all the relevant concepts for Chartered
Accountants are introduced. In SDLC, concepts related with all the development models namely waterfall,
spiral etc. used for developing the software should be clearly understood. Normally, the weaknesses of the
previous model are addressed by the next model, and these weaknesses become the strengths of the current
model. In this way, students may remember the concepts related with various models. Further, all the phases
of SDLC namely preliminary investigation, requirements analysis, designing, coding, testing,
implementation, and maintenance should be read with the coverage of all the major activities in each of the
phases in detail.
3. A control is a system that prevents, detects, or corrects unlawful events. In a quality software, necessary
controls must be incorporated at the appropriate places starting from the development itself. Keeping in
mind the aforementioned fact, next chapter is dedicated to the controls. In this chapter, first of all, students
should understand the need of the controls. They should also understand the effect of computers on internal
audit, responsibility for controls from the perspective of Management, IT, Personnel, Auditors, and cost
effectiveness of control procedures. Then, they should try to understand various IS Control Techniques and
role of an IS Auditor for each type. They should also have knowledge of controls required for system selection,
acquisition and development phase should also be clearly understood. In addition, they should cover the
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controls over system implementation, data integrity, privacy and security.
'
4. How many controls are adapted in the process out of the prescribed controls' is provided by the testing
results. This is the backbone theme of chapter four on Audit Tests of General and Automated Controls. Here,
various concepts related with testing should be covered starting from basics of testing to various level/types
of testing. After having an idea about these topics, students should also understand the concurrent audit
modules in detail with special emphasis on SCARF and CIS. Afterwards, advantages/disadvantages of
continuous auditing should be read thoroughly.
5. Consider an information system for which ten controls are recommended but due to various limitations like
cost, efforts, only six controls could be implemented. This will create some risk for the information system.
Hence, the fifth chapter is on risk assessments. The chapter on Risk assessment methodologies and
applications addresses various concepts related with risk namely, vulnerabilities, attacks, threats etc. Once
conceptual clarity has been acquired, students should have an idea about the threats to the computerized
environment and threats due to cyber crimes. Risk assessment/management process must be understood
in detail covering each sub-point. Finally, students should also cover the techniques for risk evaluation in
depth.
6. System should continue without fail at any circumstances'. 'What strategies should be followed to achieve
this goal' is discussed in this chapter on Business Continuity Planning and Disaster Recovery Planning.
Business Continuity Planning (BCP), its objectives/goals must be understood in depth. Moreover, students
should know how a Business Continuity Plan is actually developed, covering all the eight phases. Students
should also focus on various backup techniques and disaster recovery plans. Further, various audit tools
and techniques must be understood by the students and finally, audit of Disaster Recovery and Business
Resumption Plan must be covered in detail, which focuses on various important checkpoints related with
auditing.
7. In order to have a real-time integrated solution working on 24 * 7 basis, ERP comes into the picture. Students
should understand the features of ERP, its benefits, and concepts relating to Business Process
Reengineering etc. In addition, they should also have a look at ERP implementation methodology, post
implementation scenarios and some risks involved in an ERP system.
8. As the paper is about the IS controls and audit, next chapter is about various IS audit standards. In this
chapter, Information Systems Auditing Standards, Guidelines and best practices, various governing
standards viz. ISO 27001, CMM, COBIT etc. should be thoroughly read with emphasis on the key points of
each standard in depth. Student should also focus on the areas covered by each standard.
9. Information security plays a vital role in today's highly connected world. Any information system must have
three fundamental properties: resist, tolerate and recover. Hence, the ninth chapter is dedicated to
Information security and its related concepts. Student should clearly understand the need of information
security, various information security policies and their hierarchy. In addition, they should also focus on the
audit policy, audit working papers and documentations in depth.
10. In the current IT driven environment, there was a tremendous need for introducing laws to facilitate e-
118
commerce and give legal recognition to electronic records and digital signatures. Realizing this need, Govt.
of India introduced Information Technology Act in the year 2000. However, due to various transformations in
technology, it was felt necessary to carry out certain amendments to make the Act more relevant. Hence,
Govt. of India passed these amendments through a bill in 2008 and the Act was called Information
Technology (Amendment) Act, 2008, which is currently applicable. Students should understand various
definitions covered under this act, and clearly understand different chapters and sections/subsections of
this Act.
Examination related
1. In the paper of ISCA, first question may be based on a case study. These case studies may be from the
practical oriented topics such as SDLC, Control Objectives, ERP, IS Audit Guidelines/Standards, and
Security/Audit Policy etc. The case study may also be based on the concepts taken from 3-4 chapters of the
study material. Hence, students should read the case study carefully and identify the relevant concept/s
based on which the questions are to be answered.
2. Wherever possible, students should try to include relevant diagrams, tables, rough sketch etc.
3. At the Final level, sometimes, questions are also framed on generalized topics of IT, which may not be
adequately discussed in the study material. To answer such questions, students should not feel any
psychological pressure; rather they should write the answer based on their general understanding of the
topic/s.
PAPER 7: DIRECT TAX LAWS
Direct Tax Laws is one of the core competence areas of the chartered accountants. It is considered to be the most
dynamic subject of the chartered accountancy course. The tax laws of the country undergo significant changes
every year on the passing of the annual Finance Act. Apart from these major amendments which take place every
year, notifications and circulars are issued by the CBDT from time to time to implement the provisions of the Act
and clarify issues regarding the meaning and scope of certain provisions. Further, decisions are pronounced by
various courts interpreting the provisions of law.
As a student, coming out successfully in the paper on Direct Tax Laws with a good score is indeed a challenging
task. It is the endeavour of the Board of Studies to assist you to gear up to face this challenge. Planning your study
in a methodical manner well in advance of your examination is very crucial for success in examination. Adherence
to the study plan is equally important. Ultimately, it is the level and depth of your preparation which will determine
how well you perform in the examination.
An ideal study pattern for this subject is suggested hereunder and we are hopeful that each one of you would strive
to make an honest attempt to follow the same. We are sure that it would definitely have a positive impact on your
performance and the same would be reflected in your score, as well. The seven-point study plan is detailed
hereunder:
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Point 1: Know your syllabus and expected level of knowledge
Before starting your preparation for any subject, it is important that you are aware of the scope of syllabus and the
level of knowledge expected. This, in fact, should be the very first step in your study plan.
The syllabus of Final Paper 7: Direct Tax Laws covers the Income-tax Act, 1961 and Rules thereunder and the
Wealth-tax Act, 1957 and Rules thereunder. You are expected to have acquired advanced knowledge of the
provisions of direct tax laws as well as the ability to apply the knowledge of the provisions of direct tax laws to
various situations in actual practice.
The division of marks is 90 for income-tax and 10 for wealth-tax.
The requirement of advanced knowledge implies that you have to perfect your logical and analytical reasoning, as
well as interpretation of the relevant legal provisions. You have to look at the provisions and their application from
several angles. You should prepare yourself to attempt complex questions and problems based on application
and interpretation of provisions of law, including recent amendments, and case laws.
Point 2: Be informed of the Finance Act and Assessment Year relevant for your examination
The Finance Act of a particular year would be applicable for the May and November examinations of the next year.
For instance, the Income-tax Act, 1961 and Wealth-tax Act, 1957 as amended by the Finance Act, 2011 would be
applicable for May, 2012 and November 2012 examinations. The relevant assessment year for May 2012 and
November 2012 examinations is, therefore, A.Y.2012-13.
You are expected to be updated with the notifications, circulars and other legislative amendments made upto 6
months prior to the examination. For May examination, such amendments made upto 31st October of the
previous year would be relevant and for November examination, such amendments made upto 30th April of that
year would be relevant.
Point 3: Draw up a detailed study plan and allocate time for each topic/chapter of the
subject
Preparing a comprehensive study time table well in advance would be of great help in organizing your study in an
effective manner. Ideally, you should allocate at least 15 hours every week for the subject of Direct Tax Laws.
The next step is to estimate the time to be allocated for each topic/chapter of the subject. The scope of syllabus,
the contents of each chapter in the Study Material and Practice Manual would help you to broadly assess the time
which each topic of the subject would consume. Of course, you have to keep some percentage margin over and
above the time assessed by you to take care of possible difficulty in understanding or interpreting concepts,
particularly relating to international taxation and certain aspects of procedural law.
Try to organize your time table to fit in theory (procedural law) and practical (substantive law) topics intermittently
since reading too much theory at a stretch may cause boredom.
Point 4: Recapitulate the provisions of income-tax law covered at IPCC/PCC level
Since you are at the Final level, we can begin with the presumption that you are aware of the basic concepts of
income-tax i.e. components of income-tax law, concept of income, residential status and scope of total income,
120
revenue receipts, capital receipts etc. We can proceed on the premise that you are comfortable with the
provisions of substantive law i.e. exemptions, chargeability of income under each head, deductions under each
head, clubbing of income, set-off and carry forward of losses and deductions from gross total income, which you
have already studied at the PCC/IPCC level. You would also be familiar with certain aspects of procedural law
relating to filing return of income and provisions concerning advance tax and TDS.
You have to brush up these areas once again to recapitulate the provisions of law which you have already studied
at PCC/IPCC level. Do remember that, at the PCC/IPCC level, only working knowledge was required, whereas at
the Final level, you are expected to have advanced knowledge of these topics as well as the ability to apply such
knowledge to practical situations. Therefore, at the Final level, you are expected to acquire the ability to apply the
provisions of law to practical situations and also understand the interpretation of law by various courts, which
was not required at the PCC/IPCC level.
The deductions in respect of incomes i.e., deductions under sections 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID, 80-IE
etc. also assume more significance at the Final level. The students are generally not tested very much indepth in
respect of these sections at the IPCC/PCC level. Also, the entire assessment procedure is dealt with at the Final
level whereas only the provisions for filing of return of income form part of IPCC/PCC syllabus. Likewise, the
provisions for deduction, collection and recovery of tax are all covered at the Final level whereas at the IPCC level,
the syllabus was restricted to provisions concerning advance tax and tax deducted at source.
Point 5: Make full use of all the knowledge inputs of BOS
The Board of Studies brings out various publications from time to time with a view to assist the students in
education. You are advised to make full use of the Study Material and other educational inputs provided to you.
These educational inputs are also hosted at the BOS Knowledge Portal under the students' section of the
Institute's website www.icai.org. The intention of creation of this portal is primarily to ensure free and
unrestricted flow of knowledge and information to the students across the country by way of easy access to the
latest publications of the Institute. Our efforts will, however, bear fruit only if you make it a habit to browse the
portal as often as possible and assimilate the knowledge inputs contained therein. It is of utmost importance
that you read these knowledge inputs to attain conceptual clarity, to remain updated with the developments in all
the subjects and also to acquire the ability to apply the concepts to solve practical problems. Some of the
important publications of BOS in the area of Direct Tax Laws are:
Publication
Objective
Study Material
The aim of the Study
Material is to build a
strong conceptual
base by explaining the
complex direct tax laws
in a limpid form.
Key Features
.
.
.
.
The chapters relating to substantive and procedural
law are organised in a logical sequence for clear
comprehension;
The provisions of law have been explained in a lucid
manner to facilitate easy understanding;
Illustrations have been given, wherever possible, to
explain the provisions of law;
The latest amendments have been given in italics;
FINAL
Supplementary
Study Paper
Select Cases
.
The Circulars/Notifications issued by the CBDT
have been discussed along with the respective
sections to which they relate.
This is a very important
knowledge input in the
area of taxation
explaining the
amendments made by
the relevant Finance
Act and latest circulars
and notifications
issued by CBDT.
.
The Supplementary Study Paper is also divided into
chapters, so that you can co-relate the same with
the Study Material;
Illustrations have been given, wherever possible, for
better understanding of the amendments;
Related sections are grouped together and
explained to facilitate interlinking and reading of
interconnected provisions;
In respect of each notification, the relevant
provision of the Act which confers the power to
issue such notification is described briefly, so that
you can relate the notification to the appropriate
provisions of the Act.
Significant Court
rulings are reported to
help you understand
the interpretation of
the provisions of law by
judicial forums.
.
.
.
.
.
.
.
Practice
Manual
The Practice Manual
has also been grouped
chapter-wise and
contains a variety of
problems in each topic
for the better
understanding and
application of the
concepts explained in
the Study Material.
.
.
.
Important decisions of the Supreme Court, High
Court and Authority for Advance Rulings are
reported for an insight on the interpretation of the
specific provisions of law;
The case laws are grouped chapter-wise to enable
you to co-relate the same with the provisions
contained in the parallel chapter of the Study
Material;
The case laws, when read in conjunction with the
Study Material, will enable you to appreciate the
issues involved in interpreting and applying the
provisions of law to practical situations;
Case laws are also being reported from time to time
in the Students' Journal “The Chartered Accountant
Student” to keep you updated on a regular basis.
The questions in each chapter of the Practice
Manual are taken from the past 12 years question
papers set at the Final level. In addition, other
questions from past RTPs etc. are also included;
The questions are adapted as per the provisions of
law as amended by the latest relevant Finance Act;
Answers to the questions are based on the
provisions of law as amended by the latest relevant
Finance Act;
For example, in the November 2011 edition of the
Practice Manual, the questions and answers are
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122
.
.
Revision Test
Papers (RTP)
The RTPs are prepared
with the twin objective
of(1) updating you on
the latest
developments on
the statutory and
judicial front.
.
.
(2) helping you to
self-assess the
effectiveness of
your study and
revision by solving
the questions
given in Part III
independently and
comparing the
same with the
answers given.
Suggested
Answers
As the name depicts,
this publication
contains the questions
set at the CA
examination, as well
as the suggested
answers to such
questions.
.
.
.
.
based on the provisions of law as amended by the
Finance Act, 2011 and are hence, relevant for May
2012 and November 2012 examinations. The
relevant assessment year is A.Y.2012-13.
Key points are given at the beginning of each
chapter to facilitate quick revision;
Self-examination questions are added at the end of
each chapter to test your understanding of the
concepts explained in the corresponding chapter of
the Study Material.
The RTP is divided into three parts –
Part I : Statutory Update – Latest Notifications &
Circulars
Part II : Judicial Update – Latest case laws –
Supreme Court, High Court & Authority for Advance
Rulings
Part III : Questions & Answers - A Self-assessment
test.
The questions in Part III are framed to test your
awareness and understanding of the provisions of
income-tax law and wealth-tax law, particularly the
latest developments, both on the statutory as well
as on the judicial front, as well as your ability to
analyse and interpret the provisions of law.
The answers are prepared with a view to assist the
students in education;
The Suggested Answers generally represent the
ideal manner in which questions should be
answered;
Therefore, it contains references to case laws,
sections (including sub-sections and clauses),
notifications and circulars issued by the CBDT;
In solutions to computational problems, the
reasons for treatment of items are explained by way
of Notes, giving reference to the related provisions
of law and/or court rulings.
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Point 6: Follow systematic study pattern
Ideally, for the subject of Direct Tax Laws, your study pattern should be in the following sequence as briefed in the
table below:
Steps in
Preparation
Objective of study
Step I
Study each topic of your syllabus thoroughly for conceptual
clarity
Study Material (Vol. I
& II), as amended by
the Finance Act
relevant for your
examination.
Step II
After you complete study of a chapter in the Study Material,
update yourself by going through the amendments by the
Finance Act relevant for your examination and recent
Notifications and Circulars issued by CBDT relating to that
chapter.
Supplementary Study
Paper
Step III
Work out the problems and solve the questions after
completing study of each chapter in the Study Material to
test your level of understanding of concepts explained in the
said chapter.
Note – After you complete study of the entire syllabus
content, solve all the problems in the Practice Manual once
again to make sure there are no grey areas.
Practice Manual
(Volume III of the
Study Material)
Step IV
Update yourself with the latest developments on the
legislative and judicial front and self-assess your
preparation.
Revision Test Paper
(RTP)
Step V
Test your level of preparation by solving past question
papers within the given time frame of three hours and
compare your answers with the answers published by the
BOS.
You can also check your progress by solving the Mock Test
Papers hosted on the Institute's website. Mock tests are
also held at the various regional offices and branches of the
Institute.
Suggested Answers
Relevant Publication
Mock Test Papers
Note-Case laws are being reported from time to time in the Students' Journal “The Chartered Accountant
Student”. Hence, keep yourself updated on the judicial front by reading the students' journal regularly. These
case laws are later compiled in the form of a publication “Select Cases in Direct and Indirect Case Laws” after
addition of more cases and chapterisation thereof. The RTP generally contains some questions based on these
case laws.
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Step I – Study the “Study Material” for conceptual clarity
Be clear with the concepts
Ideally, when you take up any topic for study, you must first go through the relevant chapter of the Study Material
for building a strong conceptual base. Make sure you read the Study Material updated on the basis of the
provisions of law as amended by the Finance Act relevant for your examination. In case you have the earlier
edition of the Study Material, then, you must go through the Supplementary Study Paper, which explains the
amendments made by the Finance Act relevant for your examination. In addition to the Study Material, you should
preferably go through at least one of the standard text books on this subject .
Try to remember important sections
You should make it a habit to read the tax provisions along with the relevant sections so that you are able to relate
the provisions of law, circulars and notifications with the respective sections. At least, try to remember –
(i) the charging sections under each head, namely, section 15, 22, 28, 45 and 56;
(ii) the sections containing exemption provisions, namely, section 10, 54,54B, 54EC, 54F etc.,
(iii) important deductions under each head, like, sections 16, 24, 32, 36, 37, 57 etc.,
(iv) deductions from gross total income under section 80C, 80CCC, 80CCF, 80D, 80E, 80G, 80GG, 80-IA, 80IAB, 80-IB, 80-IC etc.;
(v) the sections containing significant provisions relating to companies, like section 2(22), 115-O, 115JB,
115JAA etc.,
(vi) the sections containing significant provisions relating to tax deduction at source, like sections 192, 193,
194A, 194B, 194C, 194H, 194I, 194J, 195 etc. and
(vii) important sections relating to procedural and compliance law like section 139, 143, 147, 154, 234A, 234B,
234C, 263, 264, 271 etc.
Refer the Bare Acts
Do keep the Bare Acts i.e., Income-tax Act, 1961 and Wealth-tax Act, 1957 by your side for reference purposes.
This will facilitate understanding of the language of law and the logical sequence of the sections.
Jot down key points for easy revision
Make it a habit to jot down the key points including formulae, if any, in each topic, and particularly, in your problem
areas. This would facilitate revision, especially when you have a limited time of just one day before each
examination.
Read the related provisions together
While reading the chapters in the Study Material, you should keep in mind that each chapter cannot be read on a
stand-alone basis. Moreover, for proper appreciation of the income-tax law, inter-linking and combined reading
of sections is an essential pre-requisite. The provisions contained in a chapter, say, Assessment of Various
Entities, have to be read along with the provisions relating to business taxation, capital gains, deductions from
gross total income etc., which are discussed in separate chapters of the Study Material.
We have made an attempt to explain, with the aid of a tabular presentation given in Annexure 1, the manner in
which concepts contained in a particular chapter of the Study Material have to be inter-linked with the related
provisions in another chapter of the Study Material and read together. Please note that the tabular presentation
given in Annexure 1 is only illustrative and not exhaustive. Further, in the said tabular presentation, we have also
made a mention of the provisions which are generally considered as important from the examination point of
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view. You can give more stress to these topics when you prepare for the examination. However, you should
definitely not restrict your study only to these topics. One line of advice - Never indulge in selective study and
always cover the entire syllabus.
Step II – Stay current with the “Supplementary”
An analysis of recent question papers has revealed that considerable stress is laid on recent amendments and
developments. You are advised to update yourself with the help of Supplementary Study Paper which is brought
out every year. In this publication, the amendments made in direct tax laws by the Finance Act of that year are
categorized chapter-wise and explained with the aid of illustrations and tabular presentations to facilitate easy
understanding. Further, notifications and circulars issued by the CBDT during the last 14 months (i.e., from 1st
May of the previous year upto 30th June of the next year) are also explained in the Supplementary Study Paper.
Accordingly, the Supplementary Study Paper-2011 explains the amendments made by the Finance Act, 2011 and
significant notifications and circulars issued between 1.5.2010 and 30.6.2011.
It is observed that, generally, one question carrying 16 marks, with 3 to 4 sub-divisions, is based on the latest
amendments contained in the Supplementary Study Paper. Therefore, you must carefully peruse the
amendments explained therein and update yourself. The related sections are grouped together and discussed at
one place in the Supplementary Study Paper and therefore, you would not face any difficulty in combined reading
and understanding of the interconnected provisions.
Even if you have the latest Study Material, we would still advise you to go through the Supplementary Study Paper,
since the amendments are discussed in detail therein. It would also help you understand and assimilate the
recent amendments in a more effective manner.
Step III – Apply the concepts to solve practical problems in the Practice Manual
After reading each chapter in the Study Material and the corresponding chapter of the Supplementary Study
Paper, try to work out the problems in the parallel chapter of the Practice Manual on your own, and thereafter
compare your answers with the answers given therein. This would help you to identify your mistakes and also
learn from your mistakes. Further, this process would help in revision of the concepts and principles contained in
each chapter of the Study Material and application of the same while solving practical problems.
In the Practice Manual, the problems are solved with complete working notes and reasoning for treatment of
various items by way of notes following the main solution. Court rulings have also been adequately discussed in
the answers to case law based questions. You should carefully study the rationale of the court rulings in
connection with the issue raised in the question.
Once you complete study of all the topics in the syllabus, try solving the problems in the Practice Manual once
again to test if you are clear with all the concepts or whether there are still any grey areas which require further
understanding.
Step IV – Update & Revise with the aid of the RTP
Update yourself on the statutory front
The Study Material is generally updated on the basis of the Finance Act of that year and notifications and circulars
issued upto a particular date, say, 30th June of that year. The Study Material, so updated, would be relevant for
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May and November examinations held in the following year. However, for the May examination to be held in the
following year, the significant notifications and circulars issued upto 31st October of the previous year are
relevant. The RTP for May examination, therefore, contains the significant notifications and circulars issued
between 1st July and 31st October of the previous year. Likewise, for the November examination of the following
year, the significant notifications and circulars issued upto 30th April of that year are relevant. The RTP for
November examination would, therefore, contain the significant circulars and notifications issued between 1st
July of the previous year and 30th April of the year.
For instance, the November 2011 edition of the Study Material is updated on the basis of the amendments made
by the Finance Act, 2011 and circulars and notifications issued upto 30th June, 2011. This edition of the Study
Material is relevant for May 2012 and November 2012 examination. However, for May 2012 examination, the
amendments made by circulars and notifications issued between 1st July, 2011 and 31st October, 2011 are also
relevant, and hence, the same have been explained in the RTP for May 2012 examination. Likewise, for
November 2012 examination, the amendments made by circulars and notifications issued between 1st July, 2011
and 30th April, 2012 would be relevant, and the same would be given in the RTP for November 2012 examination.
Update yourself on the judicial front
The case laws reported in Part II of the RTP containing the judicial update are very important from the examination
point of view. Since by the time you receive the RTP, you are in the final stage of preparation, you would be able to
relate the case laws reported with the provisions of law assimilated through the Study Material and Practice
Manual.
It is very important that you understand the rationale of the court ruling vis-à-vis the relevant provisions of law.
Generally, one question carrying 16 marks, with 3 to 4 sub-divisions, is case-law based, and therefore you must
carefully peruse the case laws reported in the RTP and Practice Manual.
Case laws are also being reported from time to time in the students' journal to keep you updated on a regular
basis. These cases are later compiled as a publication “Select Cases in Direct and Indirect Tax Laws” after adding
more cases and chapterisation thereof. In addition, you may go through leading tax journals like ITR, which is a
tax law weekly containing regular judicial update.
Revise what you have learnt
Appropriately, the first round of study should be concluded at least three months before the examination; the
initial round/rounds of revision should be done in the penultimate two months prior to the examination and the
final revision in the last month before the examination wherein all the loose ends should be sorted out. Solving
the questions and problems in the Revision Test Papers would help you to self-assess the effectiveness of your
study and revision.
Step V - Check your level of preparation
Solve past years' question papers and compare with Suggested Answers
You should also make an honest attempt to solve the immediately preceding examination papers within a time
span of three hours and compare your answers with the Suggested Answers published by the Board of Studies.
This will help you to identify the areas where you are deficient and enable you to take corrective steps to avoid such
mistakes in your examination.
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However, remember that Suggested Answers are prepared on the basis of the provisions applicable for the
assessment year relevant for that particular examination. For example, the Suggested Answers for November
2011 examination are based on the provisions applicable for A.Y.2011-12. In case you are appearing for the
examination in May 2012 or November 2012, the relevant assessment year would be A.Y.2012-13.
Therefore, while checking your answers with the answers given in the Suggested Answers, you should keep in
mind that your answer should vary only to the extent of amendments made by the Finance Act, 2011 and
notifications and circulars issued after 30.4.2011.
Solve Mock Test Papers
You may also try attempting Mock Test Papers hosted on the Institute's website www.icai.org to complete the
process of revision. You can also appear for the Mock Tests conducted at the regional offices and branches of the
Institute and check your level of progress.
Point 7: Face the examination with confidence
Having prepared well for the examination, it is also important that you approach the examination with a positive
attitude. Do keep in mind the following points to score well in this paper:
(i) Answer the questions with due emphasis on provisions of the law - Support your answers/conclusions with
proper reasoning. Answers should be based on relevant legal provisions or judicial decisions rather than a
mere common sense and/or guess work.
(ii) Support your treatment with provisions of law and/or case laws - In respect of computational problems, the
reasoning for treatment of various items should be given in your answer. The length and depth of reasoning to
be given would depend on the marks allotted for the question. For example, in case of a 16 marks problem on
computation of total income of a firm or company, where the question specifically requires treatment of
various items, you are expected to give the reasons for treatment of each item supported by the relevant
provisions of law and/or case law, by way of notes below the main solution depicting the additions and
deductions to arrive at the total income.
(iii) Supplement your computation with Working Notes - Give complete working notes while solving
computational problems. For example, if you are computing allowable salary of working partners, as part of
computation of total income of a firm, the working note should specify the limits under section 40(b)(v) for
allowability of salary based on book profits of the firm. The book profit to be taken into consideration for
calculating these limits should also be worked out.
(iv) Relate and apply ratio of court rulings to case-law based questions - While answering case-law based
questions, you must first relate the facts and the issue raised in the question with the facts and issue raised in
the case decided by the Court. Thereafter, you may briefly discuss the rationale of the court ruling (giving
reference to the appropriate provisions of law) and apply the ratio to the case on hand. Finally, write the
conclusion to the issue raised in the question. For example, if the question requires you to examine the
correctness of the contention of the Assessing Officer, then, your conclusion must address this question i.e.
whether or not the contention of the Assessing Officer is correct applying the ratio of the court ruling to the
facts given in the question.
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(v) Try to quote relevant section numbers/case laws - Quoting section numbers would definitely add value to
your answers. However, it is better not to quote than to misquote a section number/case law.
(vi) State your assumptions/views clearly - Since the provisions of tax laws are subject to different
interpretations by various courts, there are possibility of alternate views in the tax treatment of a particular
item of income or expense or loss or deduction. Sometimes, there may be different points of view even on
procedural law based provisions. The standard text books on the subject also express divergent views on
some provisions. As a student, you should state your view/assumption clearly and proceed to answer the
question on that basis.
(vii) Elaborate your answer keeping in mind the marks allotted for the question - You should determine the length
of your answer having regard to the marks allotted to the question. Do not have the misconception that
lengthy answers fetch more marks.
(viii)Avoid using short forms - Use of short forms like AO, ITO, IT Act, WT Act etc. should be avoided. Write the full
names of the statutes, like, “Income-tax Act, 1961” or “Wealth-tax Act, 1957”.
(ix) First answer the question which you know best - This will boost your confidence while attempting the
remaining questions and create a positive impression of your level of knowledge.
(x) Present your answers well - Underline important points, case laws and section references as and when you
answer each question. Also, make sure that your handwriting is neat and legible. Answer all parts of a
question one after the other. Do not answer different parts of the same question at different places.
(xi) Follow instructions given on the cover page of answer paper- Pay heed to the instructions given on the cover
page of the answer paper.
To summarize
If you have cleared PCE/IPCE and registered for Final course, it is the ideal time to start preparing for the Final
examination. Remember, that it is ultimately the level and depth of your study which will determine how you well
perform in the examination.
Try to enjoy what you study and do not consider learning as an onerous task. When you enjoy studying, your
learning is deeper and long lasting. Do not resort to rote learning, since it is no substitute for comprehension.
When you try to understand something, it stimulates your thinking ability.
Also, concentrate while learning so that whatever you learn goes into your permanent memory and can never be
erased. Make sure to adhere to the study plan and avoid significant deviation. Approach the examination with a
positive attitude. Rest assured, if you put in your best efforts, success will surely follow!
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ANNEXURE 2
Inter-linking of provisions of tax laws & a glimpse of important provisions of Income-tax
A. Substantive law-based Chapters (Chapters 1-14 & 18)
Chapter
Inter-linking/Important provisions
1 - Basic Concepts
Overview of
Incometax law in India
. Charge of tax
. Rates of tax
. Important
definitions, etc.
The definitions given herein have to be kept in mind while reading the related
concept contained in the relevant chapter of the Study Material. For
example,
. the definition of “manufacture” under section 2(29BA) has to be read in
the context of deductions from gross total income (like say, section 80IB) contained in Chapter 11.
. the definition of “income” under section 2(24) needs to be referred to
while determining the taxability of receipts under various heads of
income discussed in Chapters 4 to 8. For instance, any sum received by
the assessee from his employees as contributions to any provident fund
or superannuation fund or Employees State Insurance or any other fund
for the welfare of such employees is includible in the income of the
assessee as per this definition. Thereafter, if such sum is deposited on or
before the due date under the Employees Provident Fund and
Miscellaneous Provisions Act, 1952, the same is allowable as deduction
under section 36(1)(va) while computing business income.
. The definition of “assessee” and “assessment” under sections 2(7) and
2(8), respectively, have to be kept in mind while reading other chapters,
especially chapters relating to procedural law, particularly Chapter 21
on “Assessment Procedure”.
. The definitions of “Infrastructure Capital Company” and “Infrastructure
Capital Fund” in sections 2(26A) and 2(26B), respectively, have to be
kept in mind while understanding deductions under sections 80-IA and
80-IAB in Chapter 11 on “Deductions from gross total income”.
Further, the rates of tax applicable to various assessees have to be kept in
mind while computing the tax liability of various entities dealt with in Chapter
13 on “Assessment of Various Entities”.
2 - Residence &
Scope of Total
Income
Since it is the residential status of the assessee which determines the scope
of income chargeable to tax, the concepts contained herein are very
important in computing the total income of various entities dealt with in
Chapter 13 on “Assessment of Various Entities”.
The concept of residence is also relevant in the context of Chapter 15 on
“Double Taxation Relief” and Chapter 17 on “Foreign Collaboration”.
3 - Incomes which do
not form part of
total income
Many of the exemption provisions contained in this chapter have to be read
along with the relevant head of income, since they affect the computation of
income under that head. For example,
.
130
Incomes which
are excluded
from total
income, wholly or
partially
Conditions to be
fulfilled to claim
such exemption
Provisions
relating to
charitable trusts
Conditions to be
fulfilled by
charitable trusts
to claim
exemption, etc.
the exemption provisions under section 10(10) in respect of gratuity,
section 10(10A) in respect of commuted pension, section 10(10AA) in
respect of leave encashment, section 10(13A) providing for HRA
exemption etc. are required to be applied for computation of salary
income (Chapter 4).
. The exemption provisions under section 10(37) providing for capital
gains exemption on compulsory acquisition of agricultural land situated
within specified urban limits are relevant for computation of “Capital
Gains” (Chapter 7).
. The provisions of section 10(34) providing for exemption of dividend
distributed by domestic companies in the hands of the recipient have to
be considered while computing “Income from other sources” (Chapter
8).
Recently, amendments have been made in the definition of “charitable
purpose” by three successive Finance Acts. Computation of income of a
charitable trust is one of the favourite topics on which questions are being
set in the examination.
4 to 8 - Heads of
Income
. Salaries
. Income from
House Property
. Profits and Gains
of Business or
Profession
. Capital Gains
. Income from
other sources.
The concepts contained in the chapters relating to heads of incomes are not
only relevant for computation of income under each head, but are also very
important in computing the total income of various entities as required in
Chapter 13 on “Assessment of various entities”.
The provisions relating to deduction of tax at source which are explained in
Chapter 28 are important to determine whether disallowance under section
40(a)(i)/(ia)/(iii) is attracted. Therefore, the provisions of Chapter 6 has to
be read with the related provisions in Chapter 28.
Amongst the heads of income, “Profits and Gains of Business or Profession”
is the pet topic on which questions are set at the Final level. Here are some of
the important sections under this head of income –
Section
Particulars
28
Chargeability
32 & 43
Depreciation & Actual Cost
35
Expenditure on scientific research
35AD
Investment-linked tax deduction
36 & 37
Other deductions
40
Inadmissible deductions
40
AExpenses not deductible
41
Profits chargeable to tax
43B
Deductions only on actual payment
44AA
Compulsory maintenance of books of account
44AB
Audit of accounts
44AD & 44AE
Presumptive tax provisions relating to residents
44B, 44BB,
Presumptive tax provisions relating to
44BBA, 44BBB, non-residents
44DA
Rule 7A, 7B & 8 Composite income
.
.
.
.
.
FINAL
Capital Gains is again a popular topic in the examinations, especially
provisions relating to chargeability, transfer, stamp duty valuation,
indexation, cost to previous owner, transactions not regarded as transfer and
exemption provisions.
As regards “Income from other sources”, the provisions relating to section
56, especially the provisions on taxability of any sum of money or property
received by an individual/HUF without consideration or for inadequate
consideration are contained in section 56(2)(vii), the provisions relating to
taxability of shares received by a firm or company without consideration or
for inadequate consideration are contained in section 56(2)(viia) and the
provisions relating to taxability of interest received on compensation or
enhanced compensation are contained in section 56(2)(viii). These
provisions, as well as the deductions contained in section 57, amounts not
deductible as per section 58 and the provisions of section 115BB relating to
casual income are important provisions under the head “Income from other
sources”.
9 to 11
Clubbing of
income
. Set-off and carry
forward of losses
. Deductions from
gross total
income
The provisions relating to clubbing of income and set-off and carry forward of
losses have to be applied while computing income under any particular head
and in computing the gross total income of an assessee.
The deductions from gross total income have to be considered while
computing the total income of an assessee.
. Where income of a person is to be included in the income of another
person by virtue of the clubbing provisions, the income will be so
included under the respective head to which it relates.
For instance, interest income of a minor child is includible in the income
of the parent under the head “Income from Other Sources” after
providing exemption of up to Rs.1,500 as per section 10(32).
. Further, the provisions for set-off of current year losses and brought
forward losses are also to be considered to determine the net income
under each head.
The deductions from gross total income have to be given effect to in
computation of total income of any assessee discussed in Chapter 13.
12 - Inter-relationship
between
Accounting &
Taxation
For better understanding of the convergence and divergence between
Accounting Standards and Income-tax law explained in this chapter, you
should refer to the related provision of income-tax law contained in the
respective chapter and also the Accounting Standards. For example,
. the divergence between the treatment of depreciation under income-tax
law and Accounting Standard can be better understood by going
through the provisions contained in section 32 in Chapter 6 “Profits and
gains of business or profession” and AS-6.
. the provisions of section 35D in Chapter 6 “Profits and gains of business
or profession”, AS-26 and section 78 of the Companies Act, 1956 would
help you to clearly understand the divergence between the treatment of
.
131
132
preliminary expenses under the income-tax law, Accounting Standard
and the Companies Act, 1956.
13 - Assessment of
various entities
. Individuals
. HUFs
. Local authority
. Firms
. Companies
. Co-operative
societies
. Mutual Concerns
etc.
Generally, the question paper contains a question carrying 16 marks on
computation of income of a firm or company. In fact, explanation is required
for the treatment of various items. Apart from the provisions contained in this
chapter, the provisions contained in the following chapters have to be
applied and integrated for solving the problem:
Chapter No.
Particulars
1
Basic Concepts
2
Residential Status & Scope of total income
3
Incomes which do not form part of total income
4-8
Heads of Income
10
Set-off and carry forward of losses
11
Deductions from gross total income
28
Deduction, Collection and Recovery of tax
In case of a company, the problem may also require computation of MAT
under section 115JB and 115JAA vis-à-vis computation of total income
under the provisions of the Act.
14 - Tax Planning &
Ethics in Taxation
A thorough knowledge of the provisions of each head of income and
exemptions and deductions permissible is required for tax planning. For
instance:
. for tax planning in relation to a company, the provisions relating to
business taxation, deductions from gross total income and exemptions
available under section 10 have to be considered.
. tax planning for a salaried employee requires consideration of the
deductions from salary income, exemptions available under section 10,
deductions from gross total income under section 80C, 80CCC, 80CCF,
80D, 80E, 80G etc.
Therefore, a knowledge of provisions contained in Chapters 1-11 & 13 is
required to appreciate the tax planning provisions contained in Chapter 14.
18 - Business
Restructuring
. amalgamation
. demerger
. capital reduction
. conversion of firm
into a company
etc.
The tax implications of the various forms of business restructuring are
basically derived from the provisions of Chapter 7 on “Capital Gains” and
presented in such a manner so as to help you understand the tax
implications of the various forms of restructuring.
A popular topic from this chapter on which students are generally tested in
the examination is slump sale.
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133
B. International taxation-based Chapters (15 to 17, 19 & 23)
15 -Double Taxation
Relief
The provisions of section 90 and 91 relating to double taxation relief are very
significant in the context of International taxation and also, from the
examination point of view –
Section
90
Applicability
Provision
The provisions of the Act or the DTAA,
Countries with
which India has a whichever is more beneficial, will
apply.
DTAA
Therefore, knowledge of the
provisions of the Act as discussed in
the earlier chapters is required for
application of section 90.
91
Countries with
which India does
not have a DTAA
Deduction in respect of doubly taxed
income is available at the lower of
Indian rate of tax or rate of tax in the
other country.
For calculating Indian rate of tax,
knowledge of the rate of tax and the
provisions for computation of total
income, as discussed in the earlier
chapters, is required.
16 - Transfer Pricing
and other
provisions to
check avoidance
of tax
The meaning and significance of the following terms are very crucial for
attempting a question relating to determining the effect of transfer pricing
provisions:
. Arm's length price
. International transaction
. Associated enterprise
Specific anti-avoidance measures have been introduced in respect of
transactions with persons located in notified jurisdictional area by insertion
of section 94A.
Transfer Pricing is a very important aspect of international taxation and
accordingly, questions are being set from this topic from time to time in the
examinations.
Note: Chapter 17 on “Foreign Collaboration”, Chapter 19 on “Taxation of e-commerce transactions” and Chapter
23 on “Advance Rulings” also relate to International taxation. It is generally observed that one question for 16
marks, having 2 to 3 sub-divisions, is based on provisions relating to international taxation.
134
C. Procedural and Compliance law-based Chapters (20 to 22, 24 to 28)
20 - Income-tax
Authorities
21 - Assessment
Procedure
24 - Appeals &
Revision
These chapters relate to the key provisions of procedural law. The following
are the sections relating to the cardinal provisions of procedural law Chapter
Heading
Important sections
20
Income-tax Authorities
131, 132, 132B, 133A
21
Assessment Procedure
139, 139A, 143, 144, 145,
145A, 153, 153A, 153B, 154
24
Appeals & Revision
246A, 254, 263, 264
25 - Penalties
26 - Offences &
Prosecution
Penalty is leviable for failure to comply with the provisions of law. Likewise, a
fine is imposed or a prosecution is launched for any offence under the Act.
Therefore, these chapters, i.e., Chapters 25 and 26, have to be linked with
the respective chapters where compliance of the relevant provision of law is
required. In fact, you can make a note of the penalty imposable in the
margin when you study the specific provision, the non-compliance of which
would attract penal provisions. For instance,
. The requirement to maintain books of account under section 44AA is
discussed in Chapter 6 on “Profits and gains of business or profession”.
Penalty of Rs.25,000 is imposable under section 271A for failure to
maintain books of account as per section 44AA.
. The requirement to furnish audit report under section 92E is discussed
in Chapter 16 on “Transfer Pricing”. Penalty of Rs.1,00,000 is
imposable under section 271BA for failure to furnish audit report.
Therefore, you can make a note of the penalty provisions under section
271A and section 271BA in the margin when you study section 44AA and
section 92E, respectively.
. Likewise, the requirement to produce accounts and documents under
section 142(1)/142(2A) is explained in Chapter 21 on “Assessment
Procedure”. Willful failure to produce the same attracts rigorous
imprisonment of up to one year or a fine of Rs.4 to Rs.10 for every day of
default or both under section 276D.
Therefore, a combined study of the provision, the non-compliance of which
attracts penalty or prosecution, will help you grasp the penalty and
prosecution provisions in an easier manner rather than rote learning the
quantum of penalty for each default one after the other on a stand-alone
basis.
28 - Deduction,
Collection &
Recovery of Tax
Certain provisions relating to tax deduction at source have to be read with
the related provisions contained in the chapters dealing with the respective
head of income or assessment of various entities. For instance,
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135
. Section 194B requires deduction of tax at source from winnings from
lotteries, crossword puzzles and horse races, which are taxable @30% as
per section 115BB, which is discussed in Chapter 8 on “Income from
Other Sources”.
. Section 195 provides that any person responsible for paying interest or
any other sum chargeable to tax (other than salaries) to a non-resident or
foreign company is liable to deduct tax at source at the rates in force. The
provisions relating to taxation of non-residents and foreign companies
are discussed in Chapter 13 on “Assessment of various entities”. The
scope of income chargeable to tax in the hands of non-residents are
discussed in Chapter 2 “Residential Status and Scope of Total Income”.
It is only when the payment to a non-resident is taxable under the
provisions of the Act, does liability to deduct tax at source under section
195 arises.
Note - Chapter 22 on “Settlement of tax cases” and Chapter 27 on “Miscellaneous Provisions” also form part of
the syllabus of income-tax. It is observed that, generally, in the question paper, one question for 16 marks, with 2
to 3 sub-divisions, relates to application of the provisions relating to procedural law.
Wealth-tax
Wealth-tax portion is for 10 marks and generally, questions on wealth-tax, are asked in the compulsory segment
of the question paper. Three chapters are devoted to wealth-tax in Volume II of the Study Material.
Chapter
Inter-linking / Important Provisions
1 - Levy of Wealth-tax
The following provisions contained in this chapter are very important from
the examination point of view:
(1)
(2)
(3)
(4)
(5)
(6)
2 - Valuation under
Wealth-tax Act,
1957
Provision
Definition of asset]
Definition of net wealth
Definition of valuation date
Chargeability
Deemed wealth
Exemptions
Section
2(ea)
2(m)
2(q)
3
4
5
The valuation provisions are contained in section 7 read with Schedule III to
the Wealth-tax Act, 1957.
It may be noted that Chapter 1 explains the definition of assets chargeable
to wealth-tax as well as the chargeability, deeming and exemption
provisions. The valuation of such assets is, however, provided in Chapter 2.
Therefore, the provisions contained in both these chapters have to be
applied for computing the net wealth and wealth-tax liability of an assessee
on the valuation date.
136
3 - Assessment
Procedure
This chapter deals with the procedural law relating to wealth-tax. Many of
the provisions are akin to the related provisions under the income-tax law.
For example,
Section 35GA conferring power to the Commissioner to grant immunity from
prosecution is in line with section 278AB of the Income-tax Act, 1961.
Section 35K provides for bar on prosecution and inadmissibility of evidence
in certain circumstances in line with sections 279(1A)& 279(3) of the
Income-tax Act, 1961.
Section 37 on power to take evidence on oath is akin to section 131 of the
Income-tax Act, 1961.
Therefore, if you are thorough with the provisions relating to procedural law
under the Income-tax Act, 1961, you would be able to easily relate the
parallel provisions under the Wealth-tax Act, 1957 contained in this
Chapter. In fact, it would be easier for you to remember the corresponding
section under the Income-tax Act, 1961 and make a note of the same in the
margin when you study the related section under this Chapter.
PAPER 8: INDIRECT TAX LAWS
The following procedure is recommended for the preparation of Indirect Tax Laws:-
Step-1: Prepare your study schedule for Indirect Tax Laws
1.
2.
The aim of the paper is to test whether students have acquired an expert knowledge of the principles of the
laws governing central excise and customs, service tax and the ability to apply such knowledge to various
situations in actual practice.
The division of marks is 40 for Central excise, 40 for Service tax and VAT and 20 for Customs. While making
schedule of Indirect Tax Laws, devote appropriate time for all three sections- Central excise, Service tax and
VAT and Customs, keeping in view the weightage of each of the three sections.
Step-2: How to prepare each section of Paper 8: Indirect Tax Laws?
1.
2.
3.
Go through each chapter meticulously thereby understanding the concepts covered therein. A word of
advice - keep the Bare Acts and the Relevant Rules of the relevant statutes by your side when you read the
Prepare short summaries of each chapter. These summaries would be very useful for quick revision at the
time of examinations.
It is important to note that for May, 2012 and November, 2012 examinations, you are required to cover with
the following provisions:May, 2012,
Examinations
Law as amended by the Finance Act, 2011 and Notifications and circulars
issued till 31.10.2011
November, 2012
Examinations
Law as amended by the Finance Act, 2011 and Notifications and circulars
issued till 30.04.2012
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137
4. Specific guidance for each of the three sections:Service tax & VAT
(a) In service tax, first prepare thoroughly Chapter-2-Preliminary legal provisions and Chapter-3-Basic
concepts applicable to all services. Thereafter, cover other substantive provisions and the procedural law.
(c) In Chapter-4-Gamut of taxable services, you would be tested only in respect of the taxable services as
notified by the Board of Studies. At present, there are 32 services notified for the said purpose. Practical
questions requiring computation of value of taxable services and/or service tax payable may also be asked
in respect of such services requiring the application of specific provisions pertaining to these services.
(d) It has been observed that in Service tax & VAT, practical questions are usually based on valuation of taxable
services, computation of service tax liability, CENVAT credit of service tax, penalty provisions, computation
of VAT liability or input tax credit etc.
Central Excise
(a) In Central excise, one should be conceptually clear in first four key chapters of Central Excise section which
covers the Chapter-1-Basic concepts, Chapter-2 & 3-Classification and Valuation of excisable goods,
Chapter-4-CENVAT credit. Thereafter, other substantive provisions and procedural law should be covered.
(c) It has been observed that in Central excise, practical questions are usually based on central excise valuation,
computation of duty, CENVAT credit, small scale exemption etc.
Customs
(a) First of all, first five key chapters of Customs section which covers Chapter-1-Basic concepts, Chapter-2Levy of and exemptions from customs duty, Chapter-3-Types of duty, Chapter-4-Classification of goods and
Chapter-5-Valuation under Customs Act, 1962 should be strengthened followed by Chapter-8-Warehousing
and Chapter-11-Duty Drawback. Thereafter, other substantive provisions and procedural law should be
covered.
(c) It has been observed that in customs, practical questions are usually based on customs duty calculation,
customs valuation etc.
5.
You are advised to go for comprehensive study instead of selective study and should pay due emphasis on
the following mentioned topics:
CENTRAL EXCISE
Chapter-1-Basic concepts
Chapter-3-Valuation of excisable goods
Chapter-4-CENVAT credit
Chapter-5-General procedures under Central
Excise
Chapter-9-Refund
Chapter-11-Remission of duty and destruction of
goods
Judgments testing the excisability of the product
Computation of assessable value under section 4
and 4A and excise duty payable thereof
Computation of CENVAT credit admissible,
ascertaining the admissibility of CENVAT credit in
the given cases
Persons exempt from obtaining registration under
excise, Excise returns, due date for payment of
excise duty
Principle of unjust enrichment
Remission of excise duty
138
Chapter-13-Exemption based on value of
clearances-SSI
SERVICE TAX & VAT
Chapter-2-Preliminary legal provisions
Chapter-3-Basic concepts applicable to all
services
Chapter-4-Gamut of taxable services
Chapter-5-Service tax procedures
Chapter-8-Input tax credit
Chapter-9-Small dealers and composition
scheme
Chapter-10-VAT procedures
CUSTOMS
Chapter-3-Types of duty
Chapter-5-Valuation under Customs Act, 1962
Chapter-7-Importation, exportation and
transportation of goods
Computation of excise duty liability for SSIs,
ascertaining the eligibility of a manufacturing
unit for exemption under Notification No. 8/2003
dated 01.03.2003.
Computation of value of taxable services
Import of services, export of services, exemption
to small service providers
Practical problems based on following services:
. construction in respect of commercial or
industrial buildings or civil structures
. construction services in respect of
residential complexes
. banking & other financial services
. goods transport agency's services
. cargo handling services
Due dates for payment of service tax, service tax
return, registration under service tax
Computation of VAT payable and input tax credit
Composition scheme for small dealers
VAT invoice
Determination of duty where goods consist of
articles liable to different rates of duty
Computation of assessable value and the duty
payable thereon
Baggage, transshipment
6. Important publications of Board of Studies for Indirect Tax Laws
(i) Study materials (Volume I and II) - are updated with the provisions of the relevant Finance Act and the relevant
notifications and circulars. For instance, Study material for May, 2012 and November, 2012 examinations is
updated with the provisions of the Finance Act, 2011 and the notifications and circulars issued till June 30,
2011.
Practice Manual (Volume III) has been updated with the provisions of the relevant Finance Act and the
relevant notifications and circulars. Hence, the questions have been adapted in the light of the amended
provisions of the law. Similarly, answers have also been amended as per the revised provisions of the law.
(ii) Supplementary Study Paper - is a compilation of the recent amendments and developments in the field of
indirect taxation published annually. In this publication, the amendments by the latest Finance Act and the
relevant notifications and circulars in both Direct and Indirect Tax Laws are explained. For instance,
Supplementary Study Paper-2011 contains the amendments made by the Finance Act, 2011 and the
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139
notifications and circulars issued between May 01, 2010 and June 30, 2011.
Students having old study material may refer it along with Revision Test Paper to have a complete set of
revised material. For instance, in case you have the earlier edition of the Study Material (based on the
provisions of law as amended by the Finance Act, 2010), the same should be read along with the
Supplementary Study Paper – 2011 and the Revision Test Papers for May, 2012 examinations.
(iii) Select Cases in Direct and Indirect Tax Laws - This is an annual publication contains an update on important
judicial rulings, both Supreme Court and High Court.
(iv) “The Chartered Accountant Student” - The monthly Students' Journal contains regular academic updates.
(v) Revision Test Paper: Revision Test Paper for Indirect Tax Laws (IDTL) not only enables the students to assess
their preparation for the examinations, but also updates them with the latest developments (which are
applicable for the examination) of the central indirect tax legislations and judicial pronouncements. Like
every subject, the RTP of IDTL also has questions and answers and latest updates. However, being a law
subject, it also has one more segment of latest judicial rulings. Thus, the RTP of IDTL is divided into following
three parts:
Part I Statutory Updates
Significant amendments as relevant for the examinations (For instance, RTP for May, 2012 examinations
contains the amendments made by the Notifications and circulars issued between 01.07.2011 and
31.10.2011)
Part II Judicial Updates
Significant Recent Legal Decisions
Part III Questions and Answers
(vi) Suggested Answers: Suggested answers for Indirect tax laws, provided by the Board of Studies after each
examination, are prepared as per the provisions of law applicable for the respective examination. Therefore,
while referring the answers, subsequent amendments should also be taken into consideration.
Special guidance for
1. Practical problems
You should work out the practical problems from Practice Manual (Volume III of Study Material) on your own
and then compare it with the solutions provided therein. Besides, the practical problems given in the book
recommended on Indirect Taxes may also be referred to. At the time of first practice, mark the problems
which contain some difficult issues or the problems which you find important from the examination point of
view. Moreover, summarise the treatment of the said issues and mention it at the end of that question with
the marker pen. When you practice the same Chapter subsequently, pay special attention to these marked
questions. This will help you in preparing a gist of critical issues and their treatment thereto.
In the preparatory leave for the Indirect Tax Laws paper, since it is not possible to solve all the practical
questions in one day, going through the gist of these issues would suffice.
While solving the practical questions in examination, answers must be presented in a proper manner. You
140
should give assumptions wherever required and should provide explanations for treatment of various items.
2. Case laws based questions
For case laws based questions, you should refer the cases reported in the Select Cases and Part-II: Judicial
Updates of the Revision Test Paper as well as the landmark judgments in the field of indirect tax laws.
Besides, you should refer the tax journals on a regular basis. It is recommended that you should prepare a
gist of important/latest Supreme Court decisions laying down important principles of law or High Court
rulings in each Chapter for reference. It has been observed that usually in examination, two questions in
each of the central excise, service tax and customs law are based on the case laws.
While attempting the questions based on the case laws, first identify the case law with which the facts given in
the question relate to. Applying the ratio of the case law to the given question, analyse the given problem and
then arrive at a conclusion. It is important to note that mentioning the name of the case certainly provides an
extra edge to your answer. However, it is better not to quote than to misquote a case law. Moreover, providing
complete citation of the case law is not required.
3. Latest amendments based questions
An analysis of the question papers reveals that considerable stress is laid on recent amendments and
developments. It has been observed that generally, one question in each of the central excise, service tax
and customs is based on recent amendments. Hence, you should be update yourselves with the help of
Supplementary Study Paper as well as the Part-I of the Revision Test Paper as relevant for the examinations.
Step-3: Revision before examination and assessment of your preparation through Revision Test
Papers
Before examination, you should revise the entire syllabus. Thereafter, for assessing your level of preparation
before examination, go through Part-III of the Revision Test Papers. Try to attempt the questions given in Part-III
on your own and then compare it with the answers given therein. Small hints have also been provided at the end of
many questions to help you recall the relevant sections, rules or case laws. The questions are an appropriate mix
of case studies based on recent judicial pronouncements and amendments, practical problems and theoretical
questions.
Step-4: Preparatory leave before examination
In preparatory leave before examination, you should not go into much detail due to time constraints. Just go
through:
.
Summary of each chapter.
.
Gist of important/latest Supreme Court decisions laying down important principles of law or High Court
rulings in each chapter.
.
Selected practical questions and the treatment of significant issues.
.
Judicial updates.
Reading List of Books
I. INTEGRATED PROFESSIONAL COMPETENCE COURSE (IPCC)
GROUP - I
PAPER 1: ACCOUNTING
Text Books
1. First Lessons in Accounting Standards (IPCC / PCC / ATC) - M.P. Vijay Kumar; Snow White; 7th Edition, 2012.
2. Students' Guide to Accounting Standards (CA IPCC / PCC / ATC) - D.S. Rawat, Taxmann, 18th Edition, 2012.
3. Accounting for CA - IPCC - Amitabha Mukherjee & Mohammed Hanif, Tata McGraw Hill, 1st Edition, 2009.
4. Advanced Accounting (Vol-I and II) - Dr.Ashok Sehgal & Dr.Deepak Sehgal, Taxmann; 6th Edition, 2008.
5. Tulsian's Accountancy for CA - IPCC and Quick Revision Book Gr. I - Dr. P. C. Tulsian - S. Chand; 2nd Edition
2012.
6. Advanced Accounts - M. C. Shukla, T. S. Grewal & S. C. Gupta - S. Chand & Company Ltd.; Revised Edition,
2011.
PAPER 2: LAW, ETHICS AND COMMUNICATION
Reference Books
1. Bare Act of the Companies Act, 1956 .
2. Bare Act of the Negotiable Instruments Act,1881 .
3. Bare Acts of Labour Laws as covered in the syllabus
(i) The Payment of Bonus Act, 1965
(ii) The Employees' Provident Funds and Miscellaneous Provisions Act, 1952
(iii) The Payment of Gratuity Act, 1972.
4. Business Ethics And Communication, V.K. Jain, S. Chand ; Edition 2011-2012.
142
PAPER 3: COST ACCOUNTING AND FINANCIAL MANAGEMENT
PART I: COST ACCOUNTING
Text Books
1. Cost Accounting Methods & Problems - B.K Bhar, Academic Publishers; 18th Edition 2010.
2. Cost Accounting Principles & Practices - S. P Iyengar, Sultan Chand & Sons Educational Publishers ;
10th Edition , 2005.
3. Cost Accounting - V. K Saxena & C. D Vashisht ,Sultan Chand & Sons; 11th Edition, 2008.
4. Cost Accounting A Managerial Emphasis - Charles T. Horngren, Srikant M. Datar and George M Foster, Prentice
Hall of India; 14th Edition , 2011.
Reference Books
1. Cost accounting & Financial Management - Ravi M Kishore, Taxman Allied Services Ltd.; 6th Edition, 2009.
2. Principles of Cost Accounting - Edward J. Vanderbeck, Thomsan South Western 15th Edition; 2010.
3. Cost and Management Accounting - Basu & Das, Rabindra Library, Kolkata; 13th Edition, 2009.
PART II: FINANCIAL MANAGEMENT
Text Books
1. Financial Management - I. M. Pandey, Vikas Publishing House Pvt. Ltd.; 10th Edition.
2. Financial Management - Text, Problems and Cases - M. Y. Khan and P. K. Jain, Tata Mc Graw Hill Publishing
Company Ltd.; 5th Edition.
3. Fundamentals of Financial Management - Prasanna Chandra, Tata Mc Graw Hill Publishing Company Ltd.;
4th Edition.
4. Fundamentals of Financial Management - J. Van Horne and John M. Wachowicz, Prentice Hall; 13th Edition.
5. Principles of Financial Management - R. P. Rustagi, Taxmann; 5th Revised Edition.
Reference Books
1. Financial Management - Theory and Practice - Prasanna Chandra, Tata Mc Graw Hill Publishing Company
Limited; 6th Edition.
2. Financial Management - Jonathan Berk and Peter Demarzo, Pearson; 3rd Impression.
3. Fundamentals of Financial Management - Eugene F. Brigham and Joel F. Houston, Thomson South- Western;
12th Edition.
PAPER 4: TAXATION
Text Books
1. Systematic Approach to Income-tax, Service Tax & VAT - Dr. Girish Ahuja & Dr. Ravi Gupta, Bharat Law House
(Edition based on provisions applicable for A.Y.2012-13).
2. Students' Guide to Income-tax, including Service Tax/VAT - Dr. Vinod K. Singhania & Dr. Monica Singhania,
Taxmann (Edition based on provisions applicable for A.Y.2012-13).
3. Students Handbook on Income-tax, VAT & Service Tax - T. N. Manoharan & G.R. Hari, Snow white Publications
Reference Books
1. Income-tax Act, 1961 .
2. Service Tax Manual - R. K. Jain, Centax Publications P. Ltd.
Note: Students should follow the edition based on the provisions of law applicable for the assessment year relevant
for their examination.
READING LIST OF BOOKS
143
GROUP - II
PAPER 5: ADVANCED ACCOUNTING
Text Books
1. First Lessons in Accounting Standards (IPCC / PCC / ATC) - M.P.Vijay Kumar, Snow White; 7th Edition, 2012.
2. Students' Guide to Accounting Standards (CA IPCC / PCC / ATC) - D. S. Rawat, Taxmann; 18th Edition, 2012.
3. Advanced Accounting for CA- IPCC - Amitabha Mukherjee & Mohammed Hanif, Tata McGraw Hill; 1st Edition,
2009.
4. Advanced Accounting (vol. I and II) - Dr.Ashok Sehgal & Dr.Deepak Sehgal, Taxmann; 6th Edition, 2008.
5. Tulsian's Accountancy for CA - IPCC and Quick Revision Book Gr-II - Dr. P. C. Tulsian, S. Chand, 5th Edition,
2012.
PAPER 6: AUDITING AND ASSURANCE
Text Book
Student's Guide to Auditing and Assurance - Aruna Jha, Taxmann Publications Pvt. Ltd.; 2012 Edition.
Reference Books
1. Student's Guide to Auditing Standards - D. S. Rawat, Taxman Allied Services Pvt. Ltd.; 2012 Edition.
2. Auditing and Assurance - Varsha Ainapure & Mukesh Ainapure, PHI Learning Pvt. Ltd.; 2009 Edition.
PAPER 7: INFORMATION TECHNOLOGY AND STRATEGIC MANAGEMENT
PART I: INFORMATION TECHNOLOGY
Text Books
1. Introduction to Computers - Peter Norton, Tata McGraw Hill; 7th edition.
2. Information Technology - Dennis P. Curtin, Kim Foley, Kunal Sen Cathleen Moring, Tata McGraw Hill; 6th Reprint
2000.
3. Fundamentals of Information Technology - Alexis and Mathews Leon, Vikas Publication House; 2nd Edition.
4. Introduction to Information Technology - V. Rajaraman, PHI Learning; 2008.
Reference Books
1. Database System Concepts - Avi Silberschatz, Henry F. Korth, S. Sudarshan, McGraw-Hill; 6th Edition.
2. Database Management Systems - Raghu Ramkrishnan, Johannes Gehrke, McGraw Hill International; 3rd
Edition.
3. Data Communication and Networking - Behrouz Forouzan, Tata McGraw Hill; 4th Edition .
4. Internet: The Complete Reference - Margaret Levine Young, Osborne/McGraw-Hill; 2nd edition, 13th reprint
2008.
PART II: STRATEGIC MANAGEMENT
Text Books
1. Strategic Management and Business Policy - Azhar Kazmi, Tata McGraw Hill; 3rd edition, Reprint 2011.
2. Strategic Planning and Management - P.K.Ghosh, Sultan chand & Sons, New Delhi; 12th Edition, Reprint 2011.
3. Strategic Management, Text and Cases - Ravi M. Kishore, Taxman Publications Pvt. Ltd; 2nd Edition, 2011.
Reference Books
1. Exploring Corporate Strategy: Text and Cases - Johnson Gary and Kevan Scholas, Pearson Education;
7th Edition, 2011.
144
2. Concepts in Strategic Management and Business Policy - Wheelen & Hunger, Pearson Education; 12th Edition,
2010.
3. Strategic Management - John A Pearce II and Richard b Robinson, Tata McGraw Hill; 10th Edition, Reprint
2011.
4. Strategic Management - Fred R. David, PHI; 12th Edition, 2009.
II. FINAL LEVEL
PAPER 1: FINANCIAL REPORTING
Text Books
1. First Lessons in Financial Reporting - M. P. Vijay Kumar, Snow White; 5th Edition, 2011.
2. Students' Guide to Accounting Standards (CA Final) - D.S. Rawat, Taxmann; 20th Edition, 2012.
3. First Lessons in Accounting Standards (CA Final) - M.P. Vijay Kumar, Snow White; 11th Edition, 2012.
Reference Books
1. Indian Accounting Standards and GAAPs - Dolphy D' Souza, Snow White.
2. Text of Accounting Standards and Guidance Notes issued by the ICAI.
3. Text of International Accounting Standards (IASs) and International Financial Reporting Standards (IFRSs).
PAPER 2: STRATEGIC FINANCIAL MANAGEMENT
Text Books
1. Financial Management - Text & Cases 1st Ed.- Brigham Eugene F. & Ehrhardt Michael C., Cengage Learning
India Private Ltd.; 1st Edition.
2. Principles of Corporate Finance - Steward C. Myers, Richard A. Brealey , Tata McGraw Hill Publishing Co. Ltd.;
7th Edition.
3. Financial Management Text, Problems and Cases - M. Y. Khan & R. K. Jain, Tata McGraw Hill Publishing Co
Ltd.; 6th Edition.
4. Financial Management - I. M. Pandey, Vikas Publishing House; 10th Edition.
5. International Financial Management - P. G. Apte, Tata McGraw Hill Publishing Co. Ltd.; 6th Edition.
6. Investment Analysis and Portfolio Management - Prasanna Chandra, Tata McGraw Hill India; 3rd Edition.
7. Strategic Financial Management - Dr. J. B. Gupta, Taxmann; 2nd Edition.
8. Strategic Financial Management - Dr. R. P. Rustagi, Sultan Chand & Sons; 3rd Edition.
Reference Books
1. Mergers, Acquisitions, and Other Restructuring Activities- An Integrated Approach to Process, Tools, Cases,
and Solutions - Donald De Pamphilis, Elsevier India; 5th Edition.
2. Financial Derivatives - Theory, Concepts and Problems - S. L. Gupta, PHI Learning Private Ltd.; 1st Edition.
3. Financial Management - Theory and Practice - Prasanna Chandra, Tata McGraw Hill Book Co., New Delhi;
8th Edition.
4. Corporate Finance: Theory and Practice - Aswath Damodaran, Wiley India Pvt. Ltd.; 2nd Edition.
5. International Financial Management - Jeff Madura, Cengage Learning India Private Ltd.; 1st Edition.
6. International Financial Management - P K Jain, Josette Peyrard, Surendra Singh Yadav, Macmillan Publishers
India; 1st Edition.
7. International Financial Management - Vyuptakesh Sharan, PHI Learning Private Ltd.; 5th Editon.
READING LIST OF BOOKS
145
8. Portfolio Management - S. Kevin, PHI Learning Private Ltd.; 2nd Edition.
9. Fundamentals of Financial Derivatives - N. R. Parasuraman, Wiley India Pvt. Ltd.; 2nd Edition.
10. Mergers, Acquisitions and Corporate Restructuring - Strategies and Practices - Rabi Narayan Kar, International
Book House Pvt. Ltd.; 1st Edition.
PAPER 3: ADVANCED AUDITING AND PROFESSIONAL ETHICS
Text Book
Professional Approach to Advanced Auditing - Kamal Garg , Bharat Law House Pvt. Ltd. ; 12th Edition - 2012.
Reference Books
1. Compendium of Expert Advisory Committee Opinions - ICAI.
2. Compendium of Auditing Standards and Guidance Notes of ICAI (2011 Edition).
3. Student's Guide to Auditing Standards - D. S. Rawat, Taxman Allied Services Pvt. Ltd.; 2012 Edition.
PAPER 4: CORPORATE AND ALLIED LAWS
Text Books
Company Law and Practice - A. K. Majumdar Dr. G. K. Kapoor, Taxmann ; 16th Edition, July, 2011.
Reference Books
1. Guide to Companies Act, 1956 Part 1, 2 and 3 - A. Ramaiya, Lexis-Nexis ; 17th Edition.
2. Bare Act of Corporate Laws (Pocket Edition).
3. SEBI Manual.
4. FEMA Manual.
GROUP - II
PAPER 5: ADVANCED MANAGEMENT ACCOUNTING
Text Books
1. Advanced Management Accounting - Ravi M Kishore, Taxmann Allied Services Pvt. Ltd, 5th Edition, 2008.
2. Advanced Cost and Management Accounting Textbook - V. K. Saxena C. D. Vashist, Sultan Chand & Sons;
2007.
3. Advanced Cost And Management Accounting Problems And Solutions - V. K. Saxena & C. D. Vashist, Sultan
Chand & Sons; 19th Edition, 2011.
4. Cost Management Accounting & Control - Hanse , Mowen, Guan, Thomas South Western; 6th Edition, 2009.
5. Management & Cost Accounting - Colin Drury, Thomas Learning; 2008.
6. Advanced Management Accounting - Robert S. Kaplan , Anthony A. Atkinson, Prentice Hall; 2010.
7. Operation Research - S. D Sharma, Kedar Nath Ram Nath and Co; 2008.
8. Quantitative Techniques in Management - N .D Vohra, McGraw Hill; 4th Edition 2009.
9. Operation Research: An Introduction - Hamdy A. Taha, Pearson Education; 9th Edition 2011.
PAPER 6: INFORMATION SYSTEMS CONTROL AND AUDIT
Text Books
1. Information Systems Control and Audit - Ron Weber, Pearson Education; 3rd Impression, 2009.
2. Management Information Systems - Kenneth C. Laudon & Jane P. Laudon, Pearson; 11th Edition, 2009.
3. Accounting Information Systems - James A Hall, South-Western College Publishing; 7th Edition, 2012.
146
Reference Books
1. The Information Technology Act, 2000.
2. Information Technology Control and Audit - Sandra Senft and Frederick Gallegos, CRC Press; 3rd Edition, 2008.
3. Information Technology Risk Management in Enterprise Environments - Jake Kouns & Daniel Minoli, John Wiley &
Sons; 2010.
4. CISA Review Manual 2012, Published by: ISACA, 2011.
5. Concepts in Enterprise Resource Planning - Ellen F. Monk, Bret J. Wagner, Course Technology, Cengage Learning;
3rd edition, 2009.
6. Software Engineering - A Practitioner's Approach - Roger S. Pressman, McGraw-Hill; 7th Edition, 2010.
PAPER 7: DIRECT TAX LAWS
Text Books
1. Direct Tax Laws - T. N. Manoharan & G. R. Hari, Snow white Publications (Edition based on provisions
applicable for A.Y.2012-13).
2. Professional Approach to Direct Taxes Law & Practice - Dr. Girish Ahuja & Dr. Ravi Gupta, Bharat Publications
3. Direct Taxes Law & Practice - Dr. Vinod K. Singhania & Dr. Kapil Singhania, Taxmann Publications (Edition
based on provisions applicable for A.Y.2012-13).
Reference Books
1. Income-tax Act, 1961
2. Income-tax Rules, 1962
3. Wealth-tax Act, 1957
Note: Students should follow the edition based on the provisions of law applicable for the assessment year relevant for
their examination.
PAPER 8: INDIRECT TAX LAWS
Text Books
1. Indirect Taxes Law and Practice - V. S. Datey, Taxmann Publications.
Reference Books
1. Central Excise Law Manual - R. K. Jain, Centax Publications P. Ltd.
2. Customs Manual - R. K. Jain, Centax Publications P. Ltd.
3. Service Tax Manual - R. K. Jain, Centax Publications P. Ltd.
4. Service Tax-How to meet your obligations - S. S. Gupta, Taxmann Publications.
Note: Students should follow the edition based on the provisions of law as amended by the Finance Act relevant for
their examination.

How to Face CA Examinations ? (IPCC / PCC / Final)

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